Chicago Board of Trade Market News
Outlook: The commodity markets officially entered “weather market” status this week. Drought in the Dakotas and hot, dry weather forecasts for the Midwest drove nearly all grains markets higher, and July corn gained 11 ¾ cents during Tuesday and Wednesday’s trading. A corn market rally is typical for corn futures in June but this year’s rally, primed by this spring’s bad weather, seems to have arrived early.
Drought in the Dakotas lifted wheat prices this week, spillover buying from which also buoyed corn. More directly relevant to corn, however, is the hot and dry weekend forecast for U.S. corn growing regions that is casting doubts on whether the formerly rain-soaked crop can withstand the heat. Some early season dryness can be beneficial for corn as it may encourage greater root development. However, given this crop’s early struggles this heat may not be helpful.
Despite weather worries, July corn futures closed up only one penny on Thursday, down 6 cents from intraday highs. While early trading featured significant short-covering, the rally fizzled as traders actively positioned for Friday’s WASDE. The USDA’s report is expected to increase South American production estimates, which should keep bearish pressure on the markets. Brazil’s CONAB already increased its production forecast for the country, with total corn production reaching 93.8 MMT. The increase of 1 MT from the May report comes from Brazilian corn yields that are reaching record highs at 5.41 MT/hectare.
Export sales for the week ending June 1 were disappointing as corn sales only reached 436,800 MT, down 115,500 from the prior week. Still, the figure was enough to keep sales well above their needed weekly pace of 228,000 MT. Total corn sales so far in the 2016/17 crop year are 51.475 MMT, up 21 percent from the prior year.
From a technical perspective, July corn has broken out of its trading range to the upside and plowed through resistance at $3.89. However, today’s close below that point shows uncertainty as to just how bullish the weather is for corn. A close below $3.79 (former resistance which now stands as support) would certainly be bearish for the contract while a close above $3.94 ¾ (the February 16 daily high) would open significant upside potential. The fundamentals in Friday’s WASDE will decide the market’s fate, but technical indicators will help determine the amount and speed of follow-through trading.