Chicago Board of Trade Market News
Outlook: Until Thursday’s start at a correction, big short positions by funds had completely reversed with heavy volumes taking corn out of the trading range it had occupied since the last U.S. harvest. Fingers pointed all week to drought and political upheaval in Brazil coupled with floods in Argentina, but fundamentalists think the reaction is over-wrought considering the supply/demand situation, especially with the excellent U.S. planting weather. Until final trading on Thursday, Chicago futures saw offers 40 cents/bushel or higher than just three weeks ago, and settlement on Wednesday beat the $3.91 high set back in December. The unconventional market situation has even prompted some conspiracy theories. Still, the rise in corn prices has been modest relative to the increases for wheat and soybeans. Many farmers are selling into this bull rush, others are not. Some are gambling that La Niña will make the U.S. Corn Belt less ideal later this season.
Noncommercial funds have been reversing their large short positions, though as of last week they still were net short in corn. The CFTC Commitment of Traders report on Friday night will be closely analyzed. The upside is that developments in South America, including 20 straight days of rain in Argentina and incessant dry heat during pollination in Brazil make U.S. corn the cheapest in the world, with U.S. weekly corn export sales hitting solid numbers at 1,202,800 MT for old crop and new crop at 181,100 MT – even as the July contract nears $4/bushel. The downside is that it is being chased hard by a world with an abundance of cheap wheat for feeding.
U.S. corn planting (13 percent as of April 19) is advancing faster than the five-year average (8 percent), as one would expect with good weather and large investments in equipment during the bull market years. Final U.S. corn acres this season may be less than forecast due to the draw of even higher soybean prices.
The market is overbought but money is chasing momentum, which makes it vulnerable to the correction that may have started today.
Friday is the last trading day for CBOT May options.