David Fuller's view In the short-term, markets look somewhat oversold as you can see from these daily charts for corn, soybeans, wheat, oats and rough rice. Interestingly, rice has been a leader in this cycle and should be watched closely for that reason. For instance, it led on the upside several months ago; it was halfway through its recent correction before the USDA report (some data corruption in PDF but you can also find it on this link), and rice has led a bounce over the last two days in response to the technical oversold condition.


Weekly charts for corn, soybeans, wheat, oats and rough rice show that prices are more or less in the middle of their large trading ranges, with wheat slightly lower and rice a little higher. Theoretically, having failed at the upper boundaries, prices could now fall further and test the lower side of their ranges. However this would probably require either some renewed weakness in commodity prices generally or weather related evidence that is increasingly favourable for crops. Therefore my guess is that prices now have more short to medium-term upside than downside potential.

Finally, and most interestingly from my perspective are the huge "Brobdingnagian" base formations evident on the 20-year monthly charts for corn, soybeans, wheat, oats and rough rice. These multiyear bases, in nominal rather than inflation-adjusted terms, should eventually support significantly higher prices. However, this would most likely require a stronger global economy and fears of shortages due to lower-yielding crops.

Fundamentally, I hear that wheat is currently in oversupply but that the next US crop will be small. The USDA may have overstated the US corn crop, measured in volume (bushels) rather than weight. Also, there is a concern by some that the crop is of poor quality, with a high water content. I am told that soybeans are heading for a massive crop in South America unless unusually wet weather between now and mid-February delays the harvest. There has been unusually heavy Chinese buying of the US surplus. Booming Asia is driving up demand for rice.

I am a potential buyer while prices in this sector are comparatively depressed.