Nervous Bears Cover Natural Gas Positions!
Short-covering buying was responsible for today’s rally in Natural Gas futures, as traders eyed a tropical disturbance off the western coast of Africa may develop into a hurricane as it moves west toward the Caribbean. Today’s rally came after the lead month Natural Gas contract made 11-month lows at $5.192. The Commitment of Traders report shows large speculators holding a net-short position of 79,949 contracts in Natural Gas as of August 21st. Being in the heart of the Atlantic hurricane season, traders are nervous being short Natural Gas should a tropical storm strike the production infrastructure of the U.S. Gulf Coast. Resistance for October Natural Gas is seen at $5.925, with support found at $5.422. October Natural Gas closed at $5.820, up $0.230.
After hitting one-month highs of $3.70 last week, December Corn futures have fallen over 25 cents a bushel, as traders are starting to believe that the U.S. crop will be larger that current government estimates. In the August Crop Production report, the USDA estimated the U.S. Corn crop at 13.054 billion bushels, with an average yield of 152.8 bushels per acre. However, a private forecast by Professional Farmers of America has the U.S. Corn crop at 13.109 billion bushels and an average yield of 153.47 bushels per acre. Crop conditions also improved last week, with the USDA reporting 59% of the Corn crop rated good-to-excellent, up 1% from last week. Illinois and Iowa, the two leading Corn producing states, reported good-to-excellent ratings of 72% and 71%, respectively. Commodity fund selling was moderate with an estimated 3,000 contracts being sold by these large speculators. Today’s sell-off also sent December Corn below the widely watched 20-day moving average on a closing basis, which may spur further momentum-based selling. The next support point for December Corn is seen at $3.41, with resistance found at $3.55. December Corn closed at $3.44 ¾, down 8 ¼ cents.
Mike Zarembski, Senior Commodity Analyst
