Chicago Board of Trade Market News
Outlook: Full comprehension of the colossal 2016/17 corn harvest was achieved by the markets this week. December corn futures put in three consecutive new contract lows this week, leaving spot prices at their lowest levels in seven years. Bearish sentiment came from the Pro Farmer tour which concluded the national yield will be less than USDA’s projected 175 bushels per acre at 170.2. While less than USDA’s August projections, the Pro Farmer yield estimate still implies record production and a national yield of 165 bushels per acre would be needed to create any significantly bullish scenario. At this point, any bullish event will have to be demand-driven as the condition of the corn crop is at historic highs and crop maturity levels signal little risk from an early freeze. Barring any unforeseen weather event, the 2016/17 U.S. corn crop will be 15 billion bushels, much of which will land in ending stocks.
With the continued downtrend in corn prices, some commercial traders are building their long positions, taking advantage of low prices to secure product. Similarly, the USDA reported 8.4 million bushels of corn were exported for the week ending August 25, an increase from the prior week but still down for the 4-week moving average. On Wednesday, the USDA reported a surprising sale of 275,000 MT of corn to Mexico which provided some support to the market. Reports are beginning to surface that Brazil’s vessel lineup is heading into an earlier-than-usual seasonal decline which may prove USDA’s August export figures to be overly ambitious. So far, Brazil’s exports are lagging behind last year’s record setting pace but are in line with more typical years. If Brazil’s exports slow more than expected, it could open up opportunities for U.S. exporters.
Thursday’s export inspections report was neutral-to-bearish with 56 million bushels of old crop corn inspected for export. This puts inspections for the 2015/16 crop at 1.794 billion bushels, a 2 percent increase from the prior year but below USDA’s projected 3 percent demand expansion. To reach the USDA’s projections, 131 million bushels would have to be exported in the four business days remaining in the 2015/16 MY. Net exports for the week ending August 25 reached 8.4 million bushels, making the USDA’s projections a long shot.
December futures plunged lower this week breaking relevant support points and leaving Wednesday’s contract low of $3.14 ¼ as the nearest support. From here, the next support is likely found near $3.00, the September 2009 monthly low. However, futures were overextended by Wednesday’s close, having traded below the Bollinger Band line and pushed the 14-day RSI to 25 percent. The oversold condition of the market, combined with some export sales, left the market primed for an upward move on Thursday. Short covering and support in the wheat market fueled the corrective jump in prices. Initial resistance lies at $3.29 ¼ from the 10-day moving average and again at $3.39 from the 40-day moving average. Thursday’s bounce will likely be limited to a technical correction as bullish news remains limited. Cash prices across the U.S. have been weakening, especially near the Gulf area where harvest progress is pressuring basis levels. The national average corn price was $0.41 under December futures and at its lowest level in seven years.