Chicago Board of Trade Market News
Corn contracts traded lower this week as speculators exited losing long positions in corn. The prospect of a pre-pollination bounce seems unappealing to speculators who realize they are likely to end up with a loss no matter what. As a result, a number of traders holding losing long positions seem to be throwing in the towel as gracefully as possible, which can be hard for those traders holding large positions.
As the exiting of losing long positions slows down, the probability of further downside in either July or December corn contracts does not seem great at this point in time. This is especially the case when one recalls that back when both of these contracts were making their absolute lows the December 2013 WASDE report was projecting an estimated corn ending stocks figure of 1.792 billion bushels. That prior projection is larger than USDA’s present estimate of 1.146 billion bushels for either 2013/14 or the 1.726 billion bushel estimate for 2014/15. Also recall that USDA’s prior December estimate of 1.792 billion bushels was given after harvest was complete and production uncertainty was minimal. In contrast, the present sell-off has occurred prior to pollination.
The U.S. corn crop is rated as 76 percent good to excellent, with 2007 being the only year in recent history that corn conditions were better. However, there is normally some decline in crop conditions as the growing season progresses. Consider that the final average U.S. corn yield in 2007 ended up being 3 bushels per acre below the prior 10-year trend.
Of course, if current crop conditions for U.S. corn remain unchanged until year-end then the final corn yields could exceed USDA’s current trend estimate of 165.3 bushels per acre. Larger yields could increase ending stocks, but aggressively selling the December 2014 in the first week of June seems rather premature. For that reason, the present outlook is that this week’s lower prices present an excellent opportunity for corn end-users to acquire favorable pricing for throughout the summer period.