** US corn in good shape heading into pollination. Condition report found corn 75% G-E & 5% P-VP. ** Brazil second crop corn has seen some losses due to drought. Harvest about 50% complete. ** World corn carryout seen near a record high, but significant dislocations noted. ** Ethanol margins 20 c/gal positive. Hogs profitable. Feedlots/Dairy starting to turn black again. ** US Corn should see active exports through the summer. Black Sea feed wheat main competitor. ** Funds in the process of liquidating large, losing long corn position.
Overnight, the corn market opened firm, putting a small gap in on the Sunday night open, and finishing 3-4 cents higher by the AM break. Follow-through buying from Friday noted as calls for ridge formation in the Midwest one plus week out remain largely intact. Short-run conditions remain quite positive to crop development. Midwest topsoil moisture is quite good in most areas, and USDA condition reports tonight are expected to be steady/better – at least 6% better than year ago stats. Beyond this week, though, most forecasters are building in at least one full week of “hot and dry”, with an emphasis on particular on the “hot”. Keep an eye on the night-time lows? Market will be sensitive to the weather outlook beyond that point, as they will be eager to see an end to the ridge in a timely fashion. US crops are either in pollination mode or “fill mode”, so still in a very sensitive development timing? As if weather wasn’t enough, trade will also be positioning for the July WASDE update. The report is expected to have mixed implications; the bear will be watching to see how the June 30th data will be ncorporated, while the bull will be looking for significant downside world adjustments in Brazil corn in particular. Brazil second crop corn reportedly 30% harvested vs. 12% this time last year?
Overhead resistance in corn appears very imposing, to state the obvious. As expected, Dec Corn found major support below $3.50, with price counts objectives just below that at $3.30-3.35. Those with a need to sell the market should layer sales scaled-up. First major resistance point is the gap at $3.65 Dec, which was hit overnight, beyond which we have retracement targets near $3.75-$3.80.
Corn snapped a 13 day steady/lower streak, finishing Friday with solid 13-14 cent daily gains and paring losses for the short week to just 3 cents. Friday’s close represented a welcome measure of stability after a breath-taking three week, $1+ market break off recent highs. Funds were estimated net buyers of 11,000 corn Friday after a long period of aggressive liquidation of length. CFTC data after the close found large, non-commercial (aka “large spec”) traders were net sellers of 78,000 corn through Tuesday the 5th, which would pare their net length back to 107,000. They likely went into the weekend long a similar quantity. Index funds appeared to lose a few longs heading into the July delivery cycle? Export sales of late have failed to impress the corn market, and this week was no exception to this evolving trend. Just 369,800 metric tons of old crop sales were booked for 15/16, though again, when combined with 443,200 metric tons for new crop (16/17) likely met the bare minimum of analyst expectations. Notably, most of the old crop business was to Asia, helping to explain firm PNW basis levels of late. 15/16 sales + ship stands at 47.3 mmt vs. 46.3 mmt last year. US is still “the” key market through late summer, though exporters have tended to pivot toward Black Sea supply for Nov/Dec?
There is a crop report on Tues. USDA will issue wheat production estimates. It is hard to see them as bullish. Yield reports have been record like across almost all of the hard wheat belt. This is the report that will incorporate the new acreage estimates and make adjustments for the larger bean and corn stocks shown on Jun 1.This coming report might moderate price action for the next two days. But there is a very strong probability that the corn and bean markets gap higher overnight. This is extremely important for corn as it would likely leave a 4 day island. If that island is still in place after the Tues crop report, it likely puts last week’s lows as the lows for the summer. There is always a danger of anticipating the trade’s reaction to weather. The forecast change 3 times a day. But the technical signals will be very compelling if this happens. If the island does not develop or if the crop report turns the market back down, it could be very bearish with the next down side counts well below the current trade
Psychologists call habituation, as we learn from a recent related Reason article by A. Barton Hinkle (“Americans Forget How Good They Have It“), which reminded me of the Louis CK video above and inspired this post. Here’s an excerpt from Hinkle’s article:
When desktop computers were first available you had to assemble them yourself with a soldering gun and spare parts from an Erector set. Then you had to program the thing, in FORTRAN or COBOL or some other language that sounded like an alien planet in a 1950s sci-fi movie. And if you wanted to store any information, you had to write over your favorite Van Halen casette tape with your dad’s cassette recorder.
Today, less than $400 will get you a run-of-the-mill machine with a 2-gig processor, 8 gigs of RAM, and a terabyte of hard drive space in case you want to store movies on your PC. All of the movies.
Most people don’t, though, because they can live-stream everything in high-definition over connections so fast that the end of the movie arrives before the middle does. A few years ago people Googled “free wi-fi” a lot because there wasn’t much of it. Now 89 percent of the public thinks free wi-fi is listed in the Bill of Rights, and if the YouTube video of the kid falling off the swing buffers for more than a picosecond they’re never going to set foot in that McDonald’s again dammit, because what an outrage.
This is what psychologists call habituation—the tendency to get used to things, no matter how good or bad. You buy a new car and for the first few weeks you absolutely love it, but then one day you find the shine of it has worn off and it’s just a car.
A few decades ago rich people could buy encyclopedia sets on the installment plan. Now most of us walk around with a little box in our pocket that gives us instant access to nearly the entirety of human knowledge. And it’s like that in field after field.
Robert J. Samuelson recently noted that the middle class is shrinking—not because people are getting poorer, but because they are getting richer. The share of the populace that qualifies as upper middle class has more than doubled since 1979. But you listen to Bernie Sanders or Donald Trump and you’d think America has been sliding downhill since the Johnson administration. Don’t believe it for a second.
Here’s my version of that demographic shift over time in the chart below, showing the increase over time in the share of high-income US households making $100,000 or more (in constant dollars) – from 8.1% of households in 1967 (about 1 in 12) to 24.7% in 2014 (about 1 in 4).
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