Chicago Board of Trade Market News
Outlook: December corn futures marched steadily sideways this week in anticipation of the August 12 USDA WASDE report. The trade is positioning itself for a large-to-record-large yield forecast by the USDA. Managed money funds are net short corn futures while commercials are net long, indicating buying interest and possible support at these low prices. Weather in the Midwest has again been nearly perfect for the corn crop, though the proportion of corn rated good or excellent fell 2 percent to 74 percent this week. The drier parts of Ohio and Michigan are forecasted to receive rain this week which would boost crop condition ratings in what currently is the poorest rated crop. The excellent crop conditions in Illinois, Iowa, Nebraska, and other states have given way to national yield forecasts between 170-175 bushels per acre. Most expect a yield near 170-171 for the August WASDE and possibly higher revisions in the September report. The market has likely priced in a near-record crop already so any less-than-astounding forecasted yield may be neutral for the markets. A bullish case could develop if USDA estimates yield at 170 bushels per acre or lower and leaves harvested acres and demand unchanged. Even with 170 bushels per acre and 86.6 million harvested acres, the U.S. corn crop would total 14.7 billion bushels – which is hard to interpret as a bullish scenario.
The premium Brazilian corn has carried over U.S. corn in recent weeks has worked in U.S. exporters’ favor. Thursday’s corn export inspections jumped to 57.2 million bushels – an increase of 12.2 million bushels over last week and 32 million over one year ago. The latest export figures bring the 2015/16 MY year totals to 1.64 billion bushels, down 1 percent from the prior year and 1 percent below USDA’s projected demand increase. The drought in Brazil leaves the U.S. and Ukraine as nearly the only global exporters for now. Even so, U.S. exports will likely fall short of the USDA’s projected levels in the season’s remaining three weeks.
Trading in December corn futures this week was conducted within a narrow range near life-of-contract lows. Futures did not challenge the contract low set last week at $3.29 but opted to trade mildly higher. Price action will be nearly solely determined by the WASDE report but resistance for a mildly bullish report exists first at $3.36 and then at $3.43 based on moving averages. Support for a bearish report may be found at $3.29, the contract low, with secondary support 10 cents lower near $3.19. The market is technically oversold with bearish sentiment testing its limits but significant selling pressure is more than possible with a bearish USDA report tomorrow. Farmer selling is still very light and the U.S. national corn basis is unchanged from last week at $0.29 under the September contract.