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Outlook: So far, the October WASDE has done little to move corn futures out of their range-bound trading pattern. December corn futures have found support at $3.40 with strong resistance only 10 cents away at $3.50. The October WASDE was largely neutral for the corn markets, though they remain shrouded in bearish domestic and global supplies. Good weather is enabling the harvest to progress according to schedule and little supply risk remains. At this point, the corn market hangs in the balance between a record large crop and increasingly bullish export opportunities.
Additions to U.S. corn production and harvested acreage were noted in the October WASDE while export increases pared ending stock estimates. U.S. corn production for 2016/17 will be a record 15.057 billion bushels after USDA increased harvested acreage from the September report to 86.8 million acres and trimmed yields to 173.4 bushels per acre. The acreage increase was above expectations while the modest yield reduction was in-line with analysts’ pre-report thoughts. Notably, despite the production increase, U.S. ending stocks for the 2016/17 crop year were reduced by 40 million bushels after USDA increased export expectations by 50 million bushels to 2.225 billion bushels. Ending stocks for the coming marketing year are estimated at 2.32 billion bushels, up from 1.738 in 2015/16. The USDA increased expectations for U.S. corn prices by 5 cents per bushel, with the midpoint of USDA’s range falling at $3.25 per bushel.
Modest adjustments in international corn supply and demand fundamentals were noted as well with the USDA increasing Brazil’s corn production to 83.5 MMT and reducing, slightly, the global corn crop. South African 2015/16 corn production estimates were increased 13 percent from the September report to 7.9 MMT. Global ending stocks were cut by 3 MMT from the September report to 216.81 MMT for the 2016/17 crop year.
From a technical perspective, December corn is giving little indication of moving one direction or the other. Wednesday’s WASDE-induced selloff created a significantly bearish “outside day” in the charts, which was immediately reversed by Thursday’s 12 ½ cent gain. The Relative Strength Index (RSI) is neutral but some bullish developments are seen with the 10-day, 20-day, and 40-day moving averages pulling away from each other to the upside. The market has found support near $3.40 and even stronger support lies near the 40-day moving average at $3.35. Bulls will have to work hard to push prices above prominent resistance at $3.50, a point above which futures have not traded since July 19, 2016. The strong pace to export so far may support prices in the near-term but the overall trend is still bearish for corn.