Corn Price Comeback: Will Elevated Shorts Fuel Further Gains?

• Corn futures (/ZC) are trading near the highest levels seen since late July.
• Record-breaking production in the U.S. has prompted a big increase in short sellers in the corn market, but is this level sustainable?
• With a still-elevated short position for corn, there may be room for more gains as shorts capitulate.

Corn futures rebound after multi-month selloff driven by supply concerns

Corn futures (/ZCZ5) are trading near the highest levels traded since early August after rising nearly 14% from their lows in August. Still, prices remain about 8% lower since the start of the year. 

The declines have come amid a record-breaking year for corn planting in the United States. According to the August World Agricultural Supply and Demand Estimates (WASDE) report, released on August 12, corn production was forecasted at 16.7 billion bushels, up 1 billion from the month prior.  

The record-breaking production wasn’t a huge surprise to markets. The May WASDE report contains the first forecast of the year for the new crop, which is what will be harvested later that year. That report forecasted corn production at 15.82 billion bushels, significantly above the prior year’s forecast for 14.86 billion bushels, or a 6.5% year-over-year increase. 

Corn traders reacted to the expected large harvest and started selling corn aggressively in May, with that month recording a 6.6% decline in corn prices followed by a 7.8% and 3.7% drop in the subsequent two months. It wasn’t until August that corn prices started to recover, rising about 6.6% for the month. 

Prices have now moderated in the first few trading days of September. The corn market now needs to decide if the recent rebound is justified. The best argument is that corn sellers correctly predicted a surplus in the market amid record production and traded accordingly. That helps explain the recent rebound since profit takers likely collected on their short positions.

Positioning data shows a market still weighted toward the short side. Will that sustain corn’s rally?

Positioning data from the CFTC’s Commitments of Traders (COT) report illustrates this argument when we look at speculative shorts. At the start of May, short speculators, or non-commercial traders to be more specific, totaled 260,718 contracts. By July, total shorts reached 452,005, nearly doubling in just two months. That marked the largest short speculator position since August 2024. 

Since July, shorts have backed off. Per the latest COT report, speculator shorts totaled 407,947 contracts, a nearly 50k reduction from July. The next COT report will drop on Friday and it’s likely to show a further reduction in shorts since prices for corn rose over 3% during the reporting period from August 26 to September 2.   

Still, even with the recent reductions, short positions remain highly elevated from levels seen earlier this year before short positions started to build aggressively. That said, there is still plenty of dry powder, for lack of a better term, to drive shorts out of the market, especially if prices continue to rise. 

This phenomenon is known as short covering and can artificially push prices higher as shorts exit their positions. We can’t say for sure if this will occur, but it does add a potential tailwind for the long view on corn prices. 

Corn technical analysis 

Since late June, corn prices have largely traded below the 21-day exponential moving average (EMA). August saw prices make a clean break above that EMA before going on to to reclaim position above the 50-day simple moving average (SMA), another moving average that has contained upside action since June. 

Prices also broke above a poorly defined trendline that has been in place since June. Taken together, these technical developments have put corn prices in a much stronger position. A break back below the EMA and SMA would shift the momentum back to the bears, but several intraday attempts over the past week have failed to do so. That said, corn looks well positioned for further gains. 

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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