** USDA pegged 2017 corn acres at 90.9 mil, off over -3 mil yr/yr. Some prevent plant/failed acres likely. ** World 16/17 corn carryout at a record high, but not quite as burdensome when compared to use. ** Argentina & Brazil safrinha corn harvest on-going into July. Record crop(s). ** Ethanol margins slightly profitable. Livestock volatile, but hogs/cattle viewed profitable. ** Corn importers shifting their business to South America, particularly deeper into summer/autumn. ** Fund net position close to net even to start the week.
Overnight, the corn market started weaker, initially extending those losses to trade as much as 5-6 lower, though traders pared it back into the AM break to just 2 cents lower. Without a doubt, Mother Nature remains in the driver’s seat from a price discovery standpoint. U.S. crop weather during the weekend was tranquil across most of the Corn Belt, with few showers/precip to speak of. Temps were mostly in the 70’s and 80’s during the day and 50’s and 60’s at night (with a few venturing closer to 70’s). One notable exception to this was North Dakota, where the center part of the state received very welcome rains. Such areas could receive a bit more of a respite, with the five day precip maps suggesting ~1 inch rain coverage for the Dakotas into Wisconsin, with a band of 3-4 inch totals possible along the IA/MN border. Million dollar rains should they verify? The SW quadrant of the Belt will likely go without, however – welcome in soggy MO, but not so much in dry/drying Kansas and SW Iowa. Condition reports tonight are expected to show mixed feature; further deterioration in the West is likely, while the East could improve on the recent rains there. On the world scene, portions of Europe and East Ukraine remain too dry, while South America benefits from good harvest weather and West Ukraine gets welcome rain. Brazil safrinha corn in major state Mato Grosso reported 62% cut. Argentina still slogging along at ~2-3% per week and is closing in on 60% harvested of first/only crop.
Wild and violent summer weather swings continue. At current levels, we would rather be long than short from a fundamental standpoint, though tech momentum is currently swinging in favor of the bear. Defined risk strategies should be the order of the day. Aggressive traders can scale-down buy futures and own puts to hedge it up. Cautious traders should consider buying $5 CZ Calls for ~2 cents.
The corn market managed to find its footing Friday after a knee buckling Wed-Thurs break, closing six cents higher. Corn managed to stay in the green all day; the markets featured a noticeable “wobble” mid-day, but found some short-covering to lift values back near the days’ highs into the close. For the week, corn still closed 17 cents lower despite the Friday bump. Cash corn trade was quiet to end the week, as all participants involved likely just wanted to go home after an exhausting week. CFTC data Fri PM found larger-than-expected fund buying in corn in the sessions leading up to the July crop report. Managed Money traders purchased a net 148,000 contracts; 38,000 were new longs in the market, while 110,000 was covering existing shorts. Even when including the post-report sell-off Wed-Thurs, this should leave funds dangerously close to flat the market heading into the weekend. Clearly, the turn in the forecast and the absence of bullishness in the July report made some fund managers change their tune yet again? Ultimately, the ethanol industry was the “big winner” from this week’s negative price action in corn. Solid physical ethanol trade implied most of those corn price declines went straight to the bottom-line. We would estimate average Midwest ethanol margin at about 25-35 c/bu, or 10-12 c/gal, including all costs and cash inputs, which is a one month high.
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