Chicago Board of Trade Market News
Outlook: The battle between weather risk and old-crop supplies continues. Weather risk seems to be falling but drought is spreading through the western Corn Belt. At the same time, old crop corn supplies are ample and any decent production this year will ensure more than sufficient supplies. The market is trying to figure out just how much risk the weather forecasts really have left.
December corn futures fell hard this week and are near their key support point for the past nine months. Weather forecasts turned more favorable with moderating temperatures and increased precipitation changes for much of the Corn Belt. With USDA’s report showing 62 percent of corn in good/excellent condition and 67 percent of the corn silking, the crop seems “good enough” to sell off some of the weather premium. At the same time, however, today’s Drought Monitor showed expanding drought in NE, IA, and (of course) MT and the Dakotas. This shows the crop is not fully without yield risk, and futures will continue to trade with some premium.
Old crop export sales this week totaled 3.6 million bushels, more than the 1.7 million needed weekly to reach USDA’s projections. New crop sales reached 19.2 million bushels, bringing the outstanding NMY sales to 157.5 million, less than last year’s 281 million. The report was neutral-to-bearish corn, especially given the 13-cent premium FOB NOLA corn carries to FOB Paranagua corn. The price difference may indicate Brazil is sufficiently competitive to stifle new-crop corn sales for the near future. That, combined with large carry-over stocks from the 2016/17 marketing year, may mean the U.S. will have more than enough corn this fall.
From a technical perspective, December corn is range bound, caught between major support at $3.75 and resistance at $4.05 and $4.15. The market sees $3.75 corn as “too cheap” given the lingering weather risks while prices over $4.00 are “too high” given that crop conditions aren’t that bad. Stochastic indicators show the contract as slightly oversold today and some modest upswing is likely in the coming days. However, bears won’t let the contract get too high without a fundamental reason (i.e., much worse crop ratings) holding them off. For now, choppy, sideways trading is the most likely outlook for corn’s harvest contract.