Chicago Board of Trade Market News
Outlook: More favorable weather forecasts left traders eager to unwind long positions. December corn futures have fought off their seasonal tendency to decline during late summer for quite some time, and good weather was the catalyst to start the process. Some supply concerns remain, but substantial old crop stocks are applying bearish pressure to the market.
USDA’s crop conditions report showed 61 percent of the U.S. corn crop rated as good or excellent, 1 percent lower than the prior week and below the 5-year average of 69 percent. The weather so far virtually ensures USDA will lower its yield estimates in the August WASDE, but by how much remains the million-dollar question. Earlier this week, private forecasters put the U.S. yield at 162.8 BPA, implying production of 13.59 billion bushels. A separate group pegged the yield just over 165 BPA. The market seems to be adopting the less-bullish 165 BPA figure as its working number until next week’s WASDE report.
Export sales were bullish for corn this week as exporters sold 1.4 million bushels of old-crop corn, above the 1.3 million that were needed this week. More importantly, export shipments reached 42.9 million bushels, well above the 40.7 million needed this week to reach USDA’s projections. Right now, YTD bookings are 2.218 billion bushels, slightly below USDA’s forecast of 2.225 billion. Given this, unless Brazilian prices skyrocket and the U.S. export program picks up substantially, only minor changes will be made to USDA’s old-crop export forecast in the August WASDE.
From a technical perspective, December corn is oversold and hovering above key support at $3.74. It is unlikely the contract will close below this point until USDA issues its August WASDE next week. There is simply too much yield risk perceived by the market to push prices lower. However, should the WASDE report more bearish than expected yields, the next downside technical target is $3.65 ¾, and then the life-of-contract low at $3.58 ½. On the upside, minor resistance lies at $3.90, $3.98, and $4.07 before major resistance is found at $4.17 ½.