Chicago Board of Trade Market News
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Outlook: Corn markets paused this week amid what looks to be a building rally. Having put in apparent harvest lows and climbed 36 cents from there, the corn market listlessly considered the effects of South American weather, the U.S. harvest, and export demand this week. Concerns are growing over rain in Argentina that is delaying plantings. While the weather developments certainly need to be monitored, it will take severely adverse weather in December and January to exact meaningful changes on South American, U.S., or world balance sheets. On the U.S. front, corn harvest made an impressive jump this past week as farmers, largely finished with the soybean harvest, turned their attention to their corn fields. On Monday, the USDA reported 61 percent of the U.S. corn harvest was complete, 9 percent below last year’s harvest and on-track with the 5-year average. Iowa’s harvest continues to run slightly behind normal but significant impacts are not expected.
Supply shortages in South America have allowed the U.S. to export massive volumes of corn so far this year. Reports are surfacing that the U.S. may set new records for exports in October with the strong program that has occurred so far. Year to date, new crop exports are almost double what they were this time last year. Accumulated exports through October 20 this year totaled 8.044 MMT compared to 4.623 MMT the same week last year. Total U.S. corn export bookings (exports plus outstanding sales) were up 85 percent from 2015.
Last Friday’s (October 21) CFTC Commitments of Traders report showed some interesting developments. Apparently believing the harvest low is behind and seeing opportunities for expanded export demand, managed money traders pared down short positions by 46,000 contracts and added 23,000 to their long positions. Meanwhile, commercial traders, seeing opportunities to take advantage of low prices and strong demand, added 41,000 contracts to their long positions. The details of the report seem to implicate a growing view that corn prices have upward potential.
December corn futures retreated below $3.50 in light trading on Monday and Tuesday as the market took a breather and reassessed demand implications. Wednesday and Thursday ushered in commercial and fund buying that sent December futures over the $3.50 mark again. Importantly, the nearby contract closed above its 100-day moving average on Thursday which sets the stage for a test of resistance at $3.59 ¼, the October 20 high. From there, physiological resistance at $3.70 will likely be uncovered with further resistance at $3.80, the July 14 high. A test of the $3.80 mark will likely require significant bullish fundamental developments in addition to current demand strength. On the downside, support for the contract lies at Monday’s low and again at the 10-day moving average ($3.48 ¼). Going forward, corn futures will slowly continue in the minor uptrend they’ve formed, buoyed by strong exports and pressured by global supplies.