Chicago Board of Trade Market News
Outlook: The corn market has been actively watching two diverging weather trends this week. South American weather remains nearly ideal for harvest and crop production while U.S. weather is cold and rainy. The former is (as it has been for months now) depressing prices from over-supply concerns. The latter, however, is rapidly advancing delayed-planting concerns and how a late planting will impact Upper Midwest yields.
Despite cold, wet weather across the central U.S., corn planting this week reached 17 percent of the intended area, only 1 percent behind last year. Still, with weather forecasts calling for heavy rains in the Midwest, snow in parts of Wisconsin, and cool Canadian weather, traders are expecting to see the difference between this year’s planting pace and the average widen over the coming week. However, U.S. farmers can make significant planting progress in a short period of time these days, thanks to an amazing array of technologies and equipment improvements. The planting may look like it will slow down soon, but this is far from implying with certainty a late-planted crop.
Today’s Export Sales report from USDA showed another week of bullish sales and exports. Net sales for the week reached 39.3 million bushels, well above the 12.6 million needed to maintain pace with USDA’s forecast. Similarly, shipments of 54.1 million bushels were above the 42.8 million needed this week. U.S. and Brazilian corn seem to be in a continual battle over which origin is cheapest for June/July shipment. The latest quotes show FOB NOLA prices with a slim advantage over FOB Paranagua prices, which is critical to maintaining the current export pace. Whether U.S. prices can remain competitive against Brazilian-origin product when the South American winter corn crop comes to market remains to be seen, however.
From a technical perspective, May corn is still in a minor downtrend from the February 28 daily high, though significant support has been uncovered near $3.54. Commercial traders are slowly migrating to the long side of the market and funds are actively covering shorts given the U.S. weather concerns. The sizable short position held by managed money traders is important only in that it may contribute to the velocity of an upward price move should these positions be unwound. As with nearly all major market moves, commercials will lead the way, followed closely by funds and speculative traders. The average U.S. corn basis is wider than normal right now, which suggests commercial-driven price increases are not imminent. Choppy trading is expected going forward.