Market Perspectives – July 5, 2019

Chicago Board of Trade Market News

Outlook: December corn futures are 13 ¾ cents (3.3 percent) higher this week as the market rallied sharply on Wednesday before Thursday’s U.S. holiday. Fund buying on Wednesday was driven by lingering risks to the U.S. corn crop that could keep yields below USDA’s present estimate. Additional market support this week came from aggressive commercial buying.

Last week, USDA surprised the market with a 2019 planted area figure of 91.7 million acres. The market was expecting a figure closer to 85 million acres, leaving the agency’s estimate as a bearish shock. At the same time, USDA’s Grain Stocks report estimated fewer bushels of corn in storage than the market expected, which tempered futures market losses slightly. Notably, the USDA has said it will conduct another survey to re-estimate the corn planted area and, if the results are sufficiently different that the agency’s latest report, it will issue another report in August. Based on the weather this spring, the market is betting that USDA’s pending survey results will be different enough to justify another report, and that report’s acreage estimate will be below 91 million acres.

The weekly Export Sales report featured 194,000 MT of gross sales, 175,000 MT of net sales and shipments of 293,000 MT (all figures for the 2018/19 crop). YTD exports are down slightly (5 percent) while YTD bookings have slipped 15 percent due to recent slow sales. The report featured 52,000 MT of sorghum exports and 600 MT of barley shipments. Barley bookings are up 5 percent YTD.

On Monday, the USDA said 56 percent of the U.S. corn crop was rated in good or excellent condition with the figure declining slightly from the prior week. The share of corn in good or excellent condition is below the five-year average of 72 percent but is expected to improve with favorable weather for most of the Corn Belt in the coming week.

From a technical perspective, December corn futures took a sharply bearish turn last week but have since entered a more sideways trading pattern. Aggressive commercial buying, higher domestic cash prices, and some bulls spreading/outright buying from managed money funds has offered support and will likely keep the market above $4.00/bushel until final acreage and yield potential statistics are known.