Chicago Board of Trade Market News
Outlook: March corn futures are lodged in a pattern of lower, range bound trading and are hanging only a few cents above life-of-contract lows. The soy complex’s excitement over dryness in Argentina has failed to impress – or even interest – corn bulls, leaving few factors left to move prices higher. U.S. exports are in competition with South America, though rising freight rates may give exporters additional opportunities.
Argentina’s rainfall has been below normal since November. Some isolated showers have been received in recent days, but these failed to offer significant coverage. The dryness is more threatening to the Argentine soybean crop, but an extended dry pattern could impact the country’s corn planting too. Argentine corn basis is rising slowly and steadily – as are freight rates – which is giving U.S. corn more competitive opportunities. On paper at least, U.S. corn is the cheapest worldwide, which should bring more business to American exporters. The corn market, however, will wait to see evidence of additional shipments before moving prices higher.
USDA’s Export Sales report today featured 34.5 million bushels of net sales and 23.3 million bushels of shipments. Despite sales being higher than needed this week, the report was bearish corn futures as the market needs to see exports improving, not just sales. Exports marketing-year-to-date are down 38 percent from last year, and behind the pace needed to meet USDA’s projections. Typically, exports pick up this time of year as competition from South America wanes, but Brazil and Argentina have remained competitive longer into the fall this year. With weather trouble in Argentina, it’s possible that U.S. exports may pick up.
From a technical perspective, March corn is range bound and finding support near $3.50 from large commercial buying at low prices. The moving averages point to continued lower prices but $3.50 will form key psychological support. Funds hold a large short position in corn futures already and are likely unwilling to push the market to new lows with the weather in Argentina. Moreover, any short-covering by noncommercial traders could spark a mild rally in the market. However, there is currently no catalyst at work that would prompt such buying. Slow, choppy, range-bound trading is expected for the next several weeks.