Corn continues to be under pressure despite a reduction from the latest crop tour by Pro Farmer. Late last week they lowered the national yield from 170.2 from 175.1 which is a sizable 4.9 bushels below the last USDA estimate. If Profarmer is correct ending stocks should drop just below 2 billion bushels. That’s still a sizable carry but would be considered bullish post harvest as South American inventories particularly in Brazil are sold out leaving the U.S. as a lone port of origin for sales down the road in the western hemisphere. However in front of the market now is the fact that producers are selling the remainder of previously held corn onto the market as harvest looms ahead in a few weeks. Recent rallies in Corn have been met with heavy selling, specifically above 3.40 December futures which was last week’s high. Downside targets include 3.18, which was the 2014 low, then 3.08 and then 3.00. It’s simply price discovery to the downside as at to what level will new crop futures need to reach to encourage buying or short covering. The collapse in wheat prices is certainly a bearish development for corn. Trend following funds have added to their short positions to just over 148K contracts. Look to buy a break near trend line support at 3.08 should 3.18 not hold to the downside to catch a short term short covering rally. We are coming up on month end and a three day holiday weekend not to mention two huge reports for September.
The first report is the September WASDE report on Monday the 12th while month end has the quarterly grain stocks report. Funds fearing another report day surprise should cover some of their growing short positions ahead of it. Condition ratings continue to impress with corn rated 75 percent good to excellent condition. The condition is 6 points higher than last year and well above the five and ten year averages for the last week of August.
For those interested I hold a weekly grain webinar each Thursday at 3pm. It is free for anyone who wants to sign up and link for sign up is below. If you cannot attend live a recording will be sent to your email upon signup.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
