Chicago Board of Trade Market News
Outlook: The market has been relatively firm for three weeks but today’s balance sheet changes prompted by USDA’s quarterly stocks and prospective plantings reports has moved the goal posts. Corn is now at new contract lows. The quarterly corn stocks number was actually slightly below the average of estimates from analysts (off-farm sorghum stocks are large). And the export sales report was unsurprising, but there is getting past the shock of the prospective plantings number – 93.601 million acres when the average guess was that it would be 90.05 million. If this comes to fruition, some predict corn at the low to mid two-dollar range at harvest.
Corn had been playing the wet blanket before the reports, and apparently justifiably so. Funds likely regret that they had been chipping away at their short positions ahead of the reports. The previous levels of technical support (100-day moving average of $3.74) and resistance (50-day moving average of $3.67) are now in the past. Warmer weather is in the forecast for the Corn Belt as the jet stream shifts northward, which will facilitate the planting of those additional millions of acres. Expect planting to take off in the second half of April.
The situation is not completely bearish. Not reflected in today’s USDA report is the excess rain in the Delta, which has already negated some corn acres and the switch from corn to soybeans in the region could be 1 to 2.5 million acres. Meanwhile, a large amount of the forecasted new corn acres will be in the Plains, an area with lower yields and notorious for weather issues. There is a question about whether farmers will be able to obtain enough anhydrous in a timely manner for that much area. And if it is not based on a reasonable cost, a switch to soybeans may make more sense. There is the external factor of a Federal Reserve that has taken a dovish stance, sending the dollar lower. Finally, weather can provide bearish support but it can also provide bullish momentum.
Please note that the U.S. Grains Council is pleased to release a grains conversion calculator app. The app converts English units to metric units and vice-versa for grains and related measures. It is available in the Apple’s App Store, Google Play Store, Amazon’s Appstore or Microsoft’s Windows Store by searching for “grain conversion calculator.” The iPhone app is available here.