Bullish corn investors could be getting what they want in the new year if macroeconomic conditions conducive to higher prices can stay steady through 2023.
From a technical standpoint, the stage is also set for higher corn prices. A noted the Goldman Sachs Commodity Index (GSCI) as a prime indicator of where prices could head, and based on current trading activity, they look to be headed upwards.
“The GSCI uses futures contracts instead of owning the physical products for managing the fund. The GSCI is always long these contracts,” the Barchart article explained. “The GSCI is rebalanced each November for the following year’s initial percentage weighting. Looking at the 2023 initial weights, we can see that the GSCI will increase their long corn futures positions by .112%, adding a more bullish sentiment to the corn market.”
The winter months may cause some concern for corn investors, but the good news is that its production and consumption is maintained even through winter. This allows the forces of supply and demand to remain undeterred, giving avenues for corn prices to rise higher (or fall).
“There are other reasons for the increased demand for corn,” the article said further. “Corn continues to be exported throughout the winter, and livestock consumes corn in feedlots. The issue is that corn’s supply is not replenished during this period. Other uses include corn oil for cooking and corn syrup for different recipes. All of this demand depletes corn supply and contributes to rising corn prices.”
South America Will Remain a Factor
South America will continue to be a factor on corn prices, especially when it comes to Brazil. With the world currently experiencing a global food crisis, Brazil ramping up production couldn’t come at a better time.
“Brazil’s bumper corn harvest couldn’t have come at a better time for global food supplies as calamities from war to drought stymie exports from the world’s biggest producers,” a noted. “Corn exports from South American’s biggest nation are on pace to more than double this year to a record 44 million tons, according to Brazil’s grain exporter group Anec. Shipments have accelerated since October, when low-water levels in the Mississippi River snarled US exports.”
For getting agricultural commodities exposure via corn, consider the , which tracks three futures contracts for corn that are traded on the Chicago Board of Trade, including 35% second to expire contracts, 30% third to expire contracts, and 35% December following the third to expire. The various contract exposures help the fund limit the negative effects of rolling contracts, especially during a market in contango.
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