Chicago Board of Trade Market News
Outlook: July corn futures decisively moved one direction this week – sideways. Poor planting weather and ample global supplies have trapped the market’s action and, unfortunately, plenty of ambiguity exists between these two factors.
The latest Crop Progress report from USDA showed the U.S. corn crop even with the five-year average planting progress (85 percent). Traders viewed the report with both relief and skepticism; relief that planting is making progress and skepticism from knowing a large portion of those “planted” acres will be replanted. Farmers managed to get the corn crop in the ground, despite the cool, rainy weather plaguing the Midwest this year. The remaining question is how much seed is stillin the ground and how much has been washed out.
Seed companies are reporting that farmers are aggressively inquiring about and procuring additional seed for replanting. Some have called this year “historic” regarding the acres that will be replanted this year. Farmers in the Western Corn Belt are reporting some operators are preparing to replant for a second time. With farm economics in their current state, it’s tough to imagine how this will be profitable and expectations are that corn acreage estimates will fall in the June WASDE.
This week’s market fireworks largely came last Thursday when news about a political scandal in Brazil broke. Brazil’s President was implicated in a scandal between the world’s largest meat packer, JBS, and a Brazilian senator. The news rocked currency markets and the Brazilian real plunged 8 percent in the following day’s trading. The currency devaluation was great news for Brazilian farmers who received an instant price increase and sold 0.5-1 MMT of corn. The selling sent Chicago futures 5 cents lower for the day.
July corn’s technical indicators are still a jumbled mess. The moving averages, stochastics, and RSI are all nicely (and uselessly) pointing sideways and the market is entrenched in range-bound trading. Major support lies at $3.64 while resistance is only 11 cents higher at $3.75. The weather will continue to drive the market but a truly bullish case won’t develop unless the weather turns colder and wetter – or prevent-plant reports increase. Given the weather risks already present, bears have little additional selling appetite and it will take a strongly bearish report to turn the market lower.