Chicago Board of Trade Market News
Outlook: December corn jumped sharply higher Thursday, after hitting another new low for 2017 earlier in the week. The move higher was motivated by USDA’s report of China buying 142,000 MT of old-crop U.S. corn and from commodity index fund buying. With corn, wheat, and soybeans at or near multi-year lows, commodity funds view the sector as ripe with opportunity.
Commercial users, however, may hold a different view. Cash corn prices averaged less than $3/bushel for the first time this year, showing that commercials have no worries about procuring product into the fall and winter. It will be difficult for the market to sustain a significant move higher without commercial participation in the rally and higher cash prices or basis levels. Thursday’s trading activity in corn spreads showed evidence of commercial buying, however.
USDA’s export sales report was largely neutral for corn. The report had more sales than were needed but actual shipments were 14.4 million bushels less than needed to meet USDA’s projections. With YTD bookings for old-crop corn above USDA’s projected export of 2.225 billion bushels and YTD exports less than that target, it seems USDA’s figures will be just about right. Now, the attention will turn to new-crop exports and the U.S.’ ability to compete against Brazil.
From a technical perspective, cracks are starting to appear in December corn’s downtrend. On Thursday, the contract closed above $3.50, what had been a key support level, in decisive fashion. Index fund buying and other traders rolling from the September contract into the December pushed the later contract 12 ¼ cents higher to $3.57 ¾. Trading volume was robust with over 265,000 contracts trading hands. The move came when the contract was deeply oversold and ripe for a correction. For now, the long-term trend remains bearish but momentum is starting to swing bullish. December corn is attempting to put in its seasonal lows and with the U.S. yield still undecided and potentially smaller than expected, this is a poor place to turn bearish.