Chicago Board of Trade Market News
Outlook: Corn market volatility typically increases after May but July futures have shown no interest in doing so-yet. A myriad of factors is pushing the market but competing factors cancel out each individual influence. Poor U.S. weather is offset by good planting progress which is offset by poor condition ratings which is offset by good South American harvest progress. The market remains range bound but with a twitchy feel, like any factor could overwhelm the others at a moment’s notice.
USDA’s latest Crop Progress report showed 91 percent of U.S. corn is planted, nearly matching the 5-year average of 93 percent. Across the U.S., 65 percent of corn was rated as good/excellent, which is near four-year lows. Crops in Iowa and Michigan were rated comparatively well while Illinois, Indiana, and Ohio had more poorly rated crops.
Initial crop condition ratings do have correlations to realized yields. Some models suggest that, after aggregating individual state crop condition ratings and yield predictions, the U.S. yield could be near 167 bushels-per-acre (BPA). Similarly, the U.S.-average good/excellent rating mathematically translates to a yield of 169 BPA. These yield predictions are 3 BPA lower than USDA’s May WASDE forecast and point to a more average yield for 2017, compared to recent years’ record yields.
The Memorial Day holiday delayed the release of USDA’s Export Sales report until Friday but traders are expecting between 450,000-650,000 MT of 2016/17 corn to be sold in this week’s report. Tuesday’s Export Inspections report showed 47 million bushels were exported, just below the 47.8 million needed in this week’s report to match USDA’s 17 percent demand growth projection. The report had a neutral implication for the market while tomorrow’s Export Sales report could have a more pronounced impact.
The Brazilian safrinha corn harvest has begun, with Mato Grosso and Parana having harvested approximately 1 percent of their production. Brazilian corn prices are falling quickly and, according to one source, are 64 percent lower than this same time one year ago. The low prices are likely to discourage farmer selling which will force exporters to increase local market bids amid falling world prices. Storage space is becoming a problem for Brazilian farmers, however, which may quicken the pace of farmer selling.
Technical indicators point to more range-bound, sideways trading action for July corn. The 100-day moving average is nearly perfectly flat while shorter-term moving averages are almost equally as stable. Trading volume has been lackluster with little to encourage traders to add to positions. Going forward, pure fundamental factors will drive any sizable market movement.