Market Perspectives – July 22, 2021

Chicago Board of Trade Market News

Outlook: December corn futures are 9 ¼ cents (1.7 percent) higher after a week of choppy trade. Pronounced weakness in U.S. equity and energy markets on Monday pressured the CBOT, and December futures posted a bearish outside day on the charts. The market strengthened through the week, however, with dry U.S. weather forecasts supporting the climb. Weather forecasts shifted on Thursday to favor more rain for the Corn Belt, which sent grain markets lower again though corn futures showed greater strength than soybeans or wheat. For now, the market is trading weather forecasts  and U.S. supply expectations.

The U.S. corn crop will largely pass through the key yield-defining periods – pollination and kernel fill – by early August, making the mid- and late-July weather key for production. Through Sunday, USDA said 65 percent of the crop was rated good/excellent, steady with the prior week with improvement noted in the Eastern Corn Belt while crop conditions in the west deteriorated. The agency said 56 percent of the crop was silking as of Sunday, with the major producing states expected to finish this stage by next week. Eight percent of the crop is in the dough stage, slightly ahead of the normal pace.

Through Wednesday, the major global weather forecast models were in agreement about continued hot, dry weather forecast for the U.S. Plains and western/central Corn Belt. Overnight model runs early Thursday, however, diverged with the European model offering meaningful precipitation across Corn Belt and Upper Midwest next week. This triggered a round of fund selling and position liquidation, despite the fact the GFS model maintains its forecast of hot, dry weather for the Plains and western Corn Belt. Notably, neither model predicts a substantial change for the drought-stricken Dakotas and northern Plains, areas where crop are in dire need of rain.

The weekly Export Sales report once again reflected the seasonal decline in old crop export sales, but shipments were 1.003 MMT (down just 5 percent from the prior week). New crop sales were down from last week but brought 2021/22 total bookings to 16.127 MMT, up 201 percent from this time last year.

From a technical standpoint, December corn futures are trending higher in a wide $5.15-5.97 trading range. Traders shrugged off Monday’s bearish technical action as dry weather triggered “risk on” buying that on Wednesday took December corn within ½-cent of filling the chart gap left by the 6 July open. Despite the fact the market fell 7 ¼ cents the day after doing so, corn futures are still showing signs of strength. December futures found strong support at $5.50 early Thursday as commercials and end-users emerged as buyers. The market strengthened from there despite weakness in other CBOT markets. Given the drought across the U.S. Plains and mixed weather forecasts for the  Corn Belt, it seems buyers will remain active on breaks. The major upside target is $6.00 while initial support lies at $5.50 with trendline support below that at $5.15.