Market Perspectives July 5, 2013

Chicago Board of Trade Market News

Outlook: Last Friday’s bearish Acreage report caused the December corn contract to sell off about 27 cents and close at $5.11/bushel. The July 4 holiday week began with the December corn contract gapping lower to trade in a 20-cent range between $5.10-4.90/ bushel. Prices are pushed lower by favorable weather forecasts, a stronger dollar and the need for traders to reduce some of their losing long positions. On the other hand, this current price level is offering favorable pricing for end-users to extend coverage on a portion of their usage for next year.

Feed grain buyers have been offered the opportunity to lock in an average corn price below $5.25/bushel for 2014. As a result, there is a notable amount of buying each time the December contract trades below $5.00/bushel. End-users who have been buying hand-to-mouth for much of the past year seem to recognize that they are unlikely to be criticized for locking in a portion of expected usage at these price levels.

Favorable growing conditions across the U.S. Corn Belt and in other parts of the world could result in prices eventually going lower this fall, but the depth of that decline may be limited if global buyers decide to extend their coverage en masse. Furthermore, the expiring nearby July contract is currently trading above $6.80/bushel as it eventually melds with cash basis. After next Friday, the September contract, which is presently trading more than $1.50 below the July contract, becomes the nearby contract. Further, pollination has not yet occurred in most of the Corn Belt. Consequently, the outlook is that it is premature to expect U.S. corn prices to steadily decline from now into fall.