Chicago Board of Trade Market News
Outlook: July corn’s months-long pattern of trading a “boring” 10-cent trading range is clearly over. The contract is trading as a “weather market” with daily directions dependent on whether the meteorological forecast du jour is bullish or bearish. A good weather forecast on Monday (June 12) sent corn 10 cents lower but Thursday’s (June 15) NOAA forecast calling for above-normal temperatures for much of July put corn through a 12-cent trading range. The market is now almost solely trading supply changes implied by the weather and corn demand is almost forgotten.
The early portion of corn’s rally was driven by the wheat market. Drought in the Dakotas and spotty results from the Kansas wheat harvest sent all wheat futures higher. Spillover buying from wheat’s rally initially pulled corn futures higher. More recently, however, USDA rated a concerningly large portion of Illinois and Indiana’s corn as poor or very-poor, which is pulling yield estimates lower and pushing futures higher. Long-range forecasts for hotter and possibly drier weather this summer added to direct concerns about the corn crop. The futures market is presently grappling with the implications of a wet spring and a possibly dry summer, trying to find a clear trading direction.
Corn exports remain generally positive for the market, with Monday’s Export Inspections report showing 41 million bushels exported, above the 36.5 million needed to meet USDA’s projections. Thursday’s Export Sales report showed more than sufficient sales volume in old crop corn (24.2 million bushels) but slightly less-than-needed exports (39.1 million bushels of 41.2 million needed).
On Thursday, U.S. corn FOB NOLA prices were nearly equal to Brazil’s FOB Paranagua prices. So far, U.S. corn has remained competitive against South America, which has been hugely helpful for the U.S. market. Slow farmer selling in Brazil and Argentina, augmented by a slow Argentine harvest, is keeping South American prices elevated. Argentine exporters are facing negative (or nearly so) export margins which is limiting their market participation.
From a technical perspective, July corn is starting to heat up. An uptrend is forming and large trading volumes are supporting the upside breakout. Thursday’s trading, which featured a low of $3.70 and a 2.5-cent higher close, will be an important bullish marker going forward. Momentum in the market certainly swings bullish but world ending stocks will make bears unwilling to give up easily. A close above $3.90 is needed to fully confirm a strong bullish market. A close below $3.70 would be a victory for bears but the risks present in the market now make this an unlikely occurrence. For now, expect volatile trading with a bullish lean to the market.