Chicago Board of Trade Market News
Outlook: December corn futures can’t seem to catch a bid. Following the USDA’s August WASDE, the contract has traded one direction: down. While the crazy weather this spring/early summer will still have a yet-untold impact on crop yields, USDA and early-season crop tours seem to agree the effect won’t be that big. The market can easily handle some production loss, especially given the large carry-in stocks available.
From a development standpoint, the U.S. corn crop isn’t in great shape statistically. The latest USDA report estimated 62% of the nation’s corn rated good/excellent while Illinois’ corn crop included 14% poor/very poor ratings. Across the U.S., 76% of the corn in in dough stage while only 29% is dented. Typically, 35% of the corn is dented at this point in the crop year.
While the statistics are less-than-stellar, American farmers have proven that, with the help of ever-improving genetics, they can overcome all but the worst weather challenges. Early results from various Midwest crop tours show wide variability in corn conditions but are generally supportive of trend-or-higher yields. A bigger threat now, given the crop’s development delays, would be an early frost or hard freeze. Long-term weather forecasts do not currently include an abnormally early frost/freeze, which means trend-or-higher yields are the most probable outcome.
From a technical standpoint, December corn is trending down but due for a correction. Both the near- and intermediate-term trends are lower but the contract is becoming oversold. The RSI hit 30% and stochastic oscillators are at their lowest values since before the early-July weather rally. Accordingly, December corn is vulnerable to a correction higher. Commercial buying will likely lead the way, and cash prices/basis bids should be closely watched. Cash prices are heading lower every day but basis is starting to firm near 50 cents under December futures.