Chicago Board of Trade Market News
Outlook: Despite putting in new contract lows on Friday corn markets traded a tight range this week and broke from recent volatility. The markets appear to be consolidating, waiting for more information about the 2016 crop, with immediate weather concerns alleviated. The oppressive Midwest heat did not reduce crop condition ratings and 76 percent of the corn crop is rated as good or excellent. The resilience of the corn crop encouraged noncommercial funds to end their weather-market-anticipating long positions. The latest CFTC data showed a small short position in corn for the funds while commercial traders reduced short positions and became cash market buyers.
The trade is turning its focus to the August WASDE. Many expect the USDA to increase the corn yield given how well the crop tolerated the recent hot weather. The August WASDE will feature the first yield and production projections based on surveys and test plot data which are considered more reliable than the current trendline projections. Some yield models call for a national average yield of 171-172 bushels per acre which would tie or narrowly exceed the record yield of 2015. Given the inconsistency of weather thus far and the forecast for hotter and drier weather into August, yields of this magnitude are far from certain.
Thursday’s export inspections for corn fell again from the previous week, reaching 1.306 MMT. Export sales hit 36.0 million bushels last week, putting total old-crop sales at 1.917 billion bushels, slightly ahead of USDA’s July demand projections. However, old-crop sales are still lower than needed to meet USDA’s 2 percent projected annual demand increase. Analysts are viewing the export report as neutral-to-bearish.
December corn futures put in new contract lows last Friday, trading to $3.33 ¼ before closing a penny higher. The trading activity formed a key reversal chart pattern which often indicates a reversal in market direction. Trading Monday through Thursday found significant support near $3.37, though upward price moves have been limited. December futures remain under the bearish trendline established with the June 17 high, though highs on July 28 briefly broke the trendline before closing lower. The U.S. dollar broke downward on Thursday which should encourage U.S. corn exports. The market remains in a bearish trend with support for the December contract near $3.33. Basis levels through the Midwest are strengthening ($0.29 under September) but remain historically low. Farmers, having endured large cash price losses, are hardly eager sellers. Farmer selling will likely need to increase before futures can make a significant move to the downside. Sideways trading is to be expected in the near-term.