Market Perspectives – July 28, 2022

Chicago Board of Trade Market News

Outlook: December corn futures are up 54 ¾ cents (9.7 percent) this week as a threatening early-August weather outlook, spillover buying from soybeans, and a five-year high in Midwest corn basis support values. Recent weakness that took December corn to $5.64 failed to hold amid an uptick in commercial demand and short covering by speculative funds. That has helped push corn futures higher despite a lack of fresh news.

U.S. corn conditions ratings fell 3 percent last week with 61 percent of the crop rated good/excellent. The decline was a surprise for the market as it indicated the heat across the Midwest was, overall, more influential for crop stress than was precipitation across the region. USDA reported that 62 percent of the corn was silking, down 8 percent from the five-year average while 13 percent of the crop was in the dough stage (versus 15 percent on average). The weather outlook for the next two weeks is broadly favorable for the Corn Belt with diminished heat and beneficial rains forecast for most states. By early and mid-August, however, the weather forecasts turn hotter and driers, which could impact the final stages of yield determination for the crop.

The U.S. export market continues to see buyers favoring new crop positions. Old crop net export sales totaled 150.3 KMT last week while new crop net sales totaled 194 KMT. Old crop exports were down 22 percent from the prior week at 867.9 KMT, putting YTD exports at 55.391 MMT, down 11 percent. YTD new crop bookings total 7.6 MMT, down 53 percent from 2021’s breakneck pace.

From a technical standpoint, December corn futures are rallying from support near $5.64 with managed money short covering and commercial buying interest pushing the market. On Thursday, December futures hit resistance at the 200-day moving average ($6.22) and could not move above that point, making it the nearest upside target. The fact that spot corn basis in the Midwest is 86U (86 cents above September futures) and at a five-year high for the end of July indicates the strength of commercial demand. With commercials remaining active buyers, the market is likely to continue pushing higher, especially if the weather forecast remains threatening to corn and soybean yields.