Chicago Board of Trade Market News
Outlook: December corn futures defied the bearish fundamentals in the October WASDE for a few days, buoyed by spillover buying from the soybean market. Ultimately, however, corn’s own fundamentals caught up with the market, sending it slowly lower. The contract is range bound (again) with support from commercial value-buying and pressure from bearish global fundamentals.
U.S. corn export sales and exports have both been slow, but the latest USDA report showed positive signs of large sales volume of 49.9 billion bushels (1.245 MMT). Export sales are down 33 percent from last year and have reached 32 percent of USDA’s export projections, versus the historic average of 44 percent for this time of year. The reason for slow exports and sales lies with the competitiveness of South American corn. Currently, U.S. FOB Gulf corn is at a 10-cent premium to Brazil and a 19-cent premium to Argentina Upriver FOB quotes. Rising freight rates are keeping Argentina on the sidelines for now but Brazilian prices are actively working against U.S. exports.
The U.S. harvest is well behind schedule. USDA’s latest report noted 90 percent of U.S. corn is mature and only 28 percent of the crop was harvested as of last week. The harvest rate is nearly half of the normal pace (44 percent). Improving weather conditions should allow farmers to get into fields and make good progress this week. The soybean harvest is delayed but is closer to “normal” and farmers will likely switch to corn harvest soon.
From a technical perspective, December corn is heading sideways. Moving averages are theoretically bearish but, in reality, are converging to a directionless tangle of chart lines. The contract is neither oversold nor overbought and is treading water a few pennies above its life-of-contract low. The new contract low will likely serve as major support going forward, and cash market fundamentals indicate the market is unlikely to test this point again soon. U.S. corn basis is steady at $0.44-0.45 under December futures, showing both a lack of harvest selling and moderate commercial buying interest. With cash markets offering some support and global fundamentals leaning heavily on the market, December corn seems relegated to trade sideways for the next several weeks.