Chicago Board of Trade Market News
Outlook: December corn futures took a breather from their recent rally, rising just 1.5 cents/bushel (0.4 percent) this week. Support formerly coming from the wheat market stalled as wheat buyers paused to reassess ahead of tomorrow’s WASDE report. Concurrent with that, the U.S. weather forecasts turned more favorable during the past week, with less heat and increased showers for parts of the Corn Belt. Tomorrow’s WASDE is one of the most anticipated in recent history, given world wheat production cuts and expectations for increased world corn demand. Of course, U.S. corn yields, exports, and ending stocks will be marquee numbers to watch as well.
The WASDE is largely expected to feature above-trendline corn yields for the U.S, based on excellent conditions and maturity. The U.S. corn crop is 8-10 days ahead of its typical maturity schedule and is also in excellent condition. Crop conditions fell slightly this week as some heat and dryness took their toll, but 71 percent of U.S. corn is still in good/excellent condition, above the five-year average of 68 percent. Moreover, 57 percent of corn is in dough stage and 12 percent is considered “mature.” Those figures are up from their respective five-year averages of 37 and 6 percent.
The advanced maturity and overall above-average conditions have traders expecting 176.5 bushels per acre for the U.S. corn yield in tomorrow’s WASDE report. The August WASDE is the first each year when USDA uses real yield samples, rather than mathematical trendlines, to develop the forecast. Consequently, some in the trade view it as the first “real” yield estimate.
Other key figures the market will watch for in the WASDE include the U.S. corn export figure and 2018/19 ending stocks. Traders expect additional increases in USDA’s new-crop corn export figure, given the aggressive sales in that market so far. Additionally, tightening world feed grains supplies should benefit the U.S. export program. Yields and exports will, of course, factor into ending stocks estimates, which the trade has pegged at 41.404 MMT (1.630 billion bushels).
USDA said new export sales for corn hit 554,500 MT last week, bringing YTD bookings (exports plus unshipped sales) to 59.921 MMT, up 6 percent from last year. YTD exports total 52.191, even with this time last year. Old-crop corn exports will likely miss USDA’s forecast, but new-crop sales are off to a robust start. USDA also said sorghum and barley bookings are up 4 percent and 35 percent, respectively.
From a technical standpoint, December is trading sideways between $3.80 and $3.90/bushel, points which have been key support/resistance the past two weeks. Funds have massively pared back their short corn positions but have been reluctant to add new length. Of course, technical analysis matters little ahead of key fundamental reports, of which the August WASDE is certainly one. Consequently, look for the market to be caught between USDA’s U.S. supply forecasts and world demand estimates.