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NEAR-TERM MARKET FUNDAMENTALS: Forecasts of warmer weather in the Midwest through as late as the middle of September helped to pressure the corn market overnight. Traders said that weakness in crude oil and equities added to the selling pressure. One analyst noted that the current forecast moves the threat of a frost onto a back burner at this point, especially in corn which is farther advanced than soybeans. Last week’s crop progress reports showed 18% of the corn crop at the dent stage, which means that it is free from the threat of frost damage. If weather remains warm through mid September, well over half the corn crop will be safe from frost. The CFTC released its latest Commitments of Traders Report on Friday and it left the report’s format unchanged for now. The latest report is for the week ending 8/25 and it showed trend-following funds moving more clearly to the net short side. They were net sellers of 21,467 contracts which increased their net short position to 22,952 contracts. These large traders have made big swings back and forth in terms of net buying and selling in recent years, but the trend has actually been in the direction of net selling since early 2007. Index funds were net buyers of 5,689. Today is First Notice Day for September futures contracts and there were zero deliveries in corn. Official weather sources in China indicate that the drought there has expanded both in the major growing areas of the NE as well as in the south. It is getting late in the crop development cycle in the north, just as it is in the US, so the lack of rain is starting to lock in reduced yield potential in corn and soybeans.
CASH NEWS AND TENDERS: The USDA announced a sale of 105,000 tonnes of corn to South Korea yesterday and Malaysia bought 60,000 tonnes of corn from Brazil this week.
WEATHER: The short term forecast calls for a warm up to near normal temperature levels by the end of this week with a move to above normal through as late as mid September. Drought conditions have expanded in NE China according to government sources. Monsoon rains improved in India in recent days, especially in the soybean belt in central India where rains have been heavy in recent days.
TODAY’S GUIDANCE: The corn crop is less vulnerable to frost threats, so the current warm forecast is somewhat less negative for corn this morning than it is for soybeans. However, last week’s price action looked less and less like bottoming as the week wore on, and this suggests that new lows are coming. A look at the wheat market shows just how far trend-following funds can tip to the short side, and this suggests that there may be a lot more room for fund selling. First support in the December contract is at 311 1/2 and then 302 1/2. First resistance remains at 334 to 335 1/2 with the next resistance at 340 to 344 and at 349 1/2.
TODAY’S MARKET IDEAS: Short-term selling resistance for December corn comes in at 327 1/4 and a move under the August low would leave 301 1/2 and 291 1/2 as next downside objectives.
