Market Perspectives July 19, 2013

Chicago Board of Trade Market News

Outlook: Weather has become the dominant market influence, and is likely to remain so for the next few weeks. Crop conditions for corn declined a couple percentage points last Monday, and are likely to decline again next Monday (July 22). Nevertheless, the total percentage that is rated as good to excellent is about 66 percent and still above the five year average. These condition ratings and large acreage have caused certain large speculators to establish a fairly sizable net short position in new-crop corn futures. In anticipation of a substantial sell-off, these traders may have gotten a little ahead of themselves.

The current crop condition ratings level and pattern of development is presently similar tothat seen in 2011. The national average U.S. corn crop condition ratings in 2011 drifted moderately lower from July 1 into September 1 before plateauing. Whether or not a similar pattern happens again this season depends upon the timeliness of near-term rains and the average daily highs. With present weather forecasts, it is entirely possible that growing conditions could improve somewhat next week with an additional shot of precipitation and moderately lower temperatures. If so, then crop conditions could show some improvement by Monday July 29. Ideally, crop conditions could improve toward the levels of 2010, when national average corn yield was 152.8 bushels per acre. Once trend is factored into the equation, USDA’s current yield estimate of 156.5 bushels per acre looks very realistic. However, that improvement in the national average corn crop condition has still not happened. Right now, crop conditions are following a path that is more similar to 2011, when the average yield was 147.2 bushels per acre. If that pattern continues to be the case, then USDA’s recent yield estimate is likely to be too high, even after the trend is factored into the equation