Chicago Board of Trade Market News
Outlook: Market developments have evolved in conjunction with the near-term expectations that were conveyed in this section last week. A modest decline in crop conditions struck as a gentle tap but it seemed to be the blow that fractured confidence to remain in a short position prior to the release of important USDA data on Tuesday June 30. The December corn contract rallied from Monday morning’s low of $3.65 per bushel to close out the week by briefly trading above $4.05 per bushel.
The fact that further declines in U.S. corn crop conditions are likely to be made evident on June 29 is being factored into prices by the 40 cent rally this week. There also seems to be a general understanding that there is little precedence for crop conditions to sharply reverse a declining trend and bounce back later in the season. So, even though the final yields have limited statistical correlation with the initial crop condition estimates, there is seldom a tendency for crop condition estimates in the latter part of the season (which are strongly correlated with final yields) to rebound back to prior high levels that occurred earlier in the season. As a result, declining crop conditions any time in the growing season translates into a lower estimate for final yields.
Throw in uncertainty about acreage with the prospect of yield reduction and that combination is enough to make bearish traders nervous about holding a sizable short position at levels that are in the lower quartile of prices from the past seven years. Naturally. Their anxiety can be reduced after the Acreage and Stocks reports are published and the weather forecast improves going into pollination, but the outlook for the remainder of this summer is that the prior confident arrogance to challenge anyone who dares stand in front of new lows will have largely dissipated.