** US corn planting effectively complete. Condition report found corn 75% G-E & 4% P-VP. ** Brazil second crop corn has seen some losses due to drought. Harvest about 10% complete. ** World corn carryout seen near a record high, but significant dislocations noted. ** Ethanol margins 10 c/gal positive. Hogs profitable. Feedlots/Dairy generally losing money. ** US Corn should see active exports into early summer. Black Sea feed wheat main competitor. ** Funds now net long corn after being short 250k+ in Mar/Apr. Fund buying in commodities noted.
Overnight, the corn market maintained its sudden tilt to the bear side, as rains continued to roll across the Midwest. Good rains were seen across Northern IL, streaks of Indiana, and a solid 75% of Ohio crop areas (WC missed out). There are still a few problem spots – East KS, parts of Iowa, southern half of Illinois – but all in all, billion dollar rains for the Belt. Outlook maps have also taken on a less threatening vibe; yes, they are favoring some net drying, but heat has been toned down significantly for the Midwest. The end result? A quick, sharp, 50 cent break off the highs in corn. Export sales this morning were good, but was in-line with expectations and perhaps more heavily-weighted toward the new crop than many thought. Net old crop sales of 870,700 MT are 32% below the 4 week average, with at least half of that going to traditional buyers such as Japan and Mexico. Net new crop sales were 550,300 mt. Sales + Ship in old crop currently stand above year ago levels, and are right at the USDA’s sales goal. There was a little export business overnight, but it tended to tilt away from the US. Taiwan bought a cargo of optional origin corn for Sept, while South Korea was in for two cargos of Black Sea corn for Nov. Look for volatility in currency today with the Brexit vote results due out overnight.
Corn appears to have found an interim high – still plenty of summer left, but would need to see some awfully threatening weather to erase $4.40. Corn is approaching some important support levels, namely the $3.80-$3.85 level in Sept. We would expect aggressive “second chance selling” on a rally back up near $4.15-$4.20 in CZ. We still like using Sept options to manage risk.
Corn tried to bounce a bit Wednesday after a sharp Mon-Tues break, but proved unable to fight off the turn toward much more favorable weather prospects for late June & early July. Funds were estimated net sellers of about 10,000 corn today; when including option deltas, some speculate they may have chopped their previous net length in half to about 120,000 contracts. CFTC report tomorrow night will be well-watched, as it should include much of action off the break? Weekly EIA ethanol data remains highly volatile, this time removing much of the recent surge in production, though stocks did not draw down much. Production fell a whopping 5% this week; run rates of 962,000 bbl/day would consume 101 million bushels of grain on the week, and 5.1 billion bushels of “just corn” (ie: excl. milo and other alternative feedstuffs) over the course of a marketing year. YTD average running behind levels needed to meet USDA grind projections? USDA estimated egg sets were off 1% on a yr/yr basis, while broilers placed were up 1%. Meat traders gearing up for the “Super Bowl” Friday; a number of big reports, chief among them Quarterly Hogs & Pigs data and Cattle on Feed. Some chatter around of more acres breaking in favor of corn than soybeans in South America next year? Harvest ongoing?
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