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NEAR-TERM MARKET FUNDAMENTALS: Traders say that the corn market is still responding to yesterday’s very bearish acreage report which sent the market limit down through most of the day session. This came as the USDA “found” millions of acres that it failed to account for on the March Planting Intentions Report. So, instead of dropping by 1 million acres from the March report, the corn acreage number jumped sharply which added about 3 million acres that traders were not expecting prior to yesterday. The resulting sharp break took the December contract to well below the March low of 375 1/2. However, prices recovered somewhat overnight after that session started out with a further push below yesterday’s limit down close. Weather is again becoming more of a mixed factor with some dryness edging into parts of the SW Corn Belt and the Delta with more dryness forecast in most of the Midwest through next week. Some forecasters are also calling for above normal temperatures starting by the middle of the second week of July and this could cover the entire Corn Belt by the end of the second week of July. This heat will come as much of the corn crop is wrapping up the silking stage of development and areas that were planted earliest will be starting to enter the pollination stage. On yesterday’s reports, the USDA pegged corn planted area at 87.035 million acres. Again, that was about 3 million acres above trade expectations. This was also the second largest corn acreage number since 1946. The extra 3 million acres could add 420 million bushels or more to new crop production at the USDA’s current yield projection. The quarterly stocks number came in at 4.266 billion bushels, about 90 million bushels above trade expectations. Analysts indicate that this can be added directly to current ending stocks projections for 2008/09. With the added production potential for new crop, this could leave 2009/10 ending stocks more than 500 million bushels higher than the USDA’s latest projection, although lower prices are likely to increase feed, and possibly ethanol, demand in the US and overseas. Deliveries against the July corn contract were zero again today with the total for the month so far also at zero.
WEATHER: Dry weather is expected to continue today in most of the Midwest with the exception of the NE corner. A band of rain is also expected from western North Dakota down through eastern Kansas and into northern Arkansas. The Midwest should ten remain mostly dry through early next week with the exception of some rain in the SW and south central Midwest on Friday, Saturday and Sunday. Temperatures are expected to be moderate in much of the Midwest through next week and hot in the southern and central Plains. This may shift to a generally hot pattern starting about ten days out with a hot air mass covering nearly all of the Midwest and Plains from 10 to 14 days out.
TODAY’S GUIDANCE: The USDA delivered a shocking surprise to the corn market yesterday with a big jump in estimated corn acreage instead of the decline that most of the industry was looking for. In s sense, this should not have been such a big surprise since it was clear that the USDA had “abandoned” millions of acres on its March Planting Intentions Report. It should have been obvious that actual farmers were unlikely to abandon millions of perfectly good acres come planting time, and it now appears that they did not. The focus can now return to weather with forecasts of hotter weather building up into the Midwest from the west and SW after next week. It is difficult to find any meaningful support above the December low at 349 1/4, although today’s low could become support if the market rallies strongly today and closes near its highs. The March low at 375 1/2 has turned into a major resistance point with the next resistance at 390 1/2.
TODAY’S MARKET IDEAS: While the down trend is obviously firmly in place, the market may be temporarily oversold.
