Chicago Board of Trade Market News
Outlook: Trading in corn was volatile this week with markets gyrating according to changing weather forecasts. The U.S. corn crop remains in good condition with 76 percent rated as good or excellent. The good crop condition added to bearish sentiment later in the week as the crop appears able to withstand the current Midwest heat wave. Temperatures in the Corn Belt are going be oppressive but good July rainfalls and soil moisture will help the crop endure the heat. Despite the heat, the trade is not ruling out the possibility of an above-trend line yield this fall. Some now believe that USDA may actually increase yields in its August estimate which would push ending stocks above the psychologically important 15 percent level. Statistically, however, USDA has cut yield estimates in the September WASDE report in five of the last ten years.
Friday’s export inspections for corn fell from the previous week but were at the top end of analysts’ range. Still, the report is viewed unimpressive and thus as bearish. Export inspections for the 2015/16 crop year total 1.486 billion bushels, down 3 percent from the prior year. More importantly, the year-to-date inspections are below USDA’s expected 2 percent increase in export demand. U.S. exports have been stymied partly due to inexpensive feed wheat on the global markets.
December corn put in new contract lows on Wednesday and Thursday, closing below support previously found at $3.46. Noncommercial traders have nearly fully liquidated their long position – which totaled over 250,000 contracts at one point – which has added to the selling pressure. The U.S. dollar gained modest momentum this week which further pressured corn markets. From a technical perspective, the market is oversold and in an established downtrend. Should the oncoming heat wave damage the crop more than is currently anticipated, resistance will likely be found at $3.63. Technically, there is little to stop the markets from putting in much lower lows. However, basis remains strong through the U.S. ($0.31 under September) and farmers are becoming less willing sellers below $3.45. Without significant weather events or other shocks, the market will likely grind lower towards $3.30.