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NEAR-TERM MARKET FUNDAMENTALS: The corn market continues the modest rally that began last week after the December contract made another new low for the move last Monday. Traders indicate that the rally may be a combination of short covering and carryover strength from soybeans, with some concern being registered that the market has not fully priced in the risk of an early frost. For now, there is no frost in the forecast for major growing areas. In fact, this week is expected to start with a warm up to above normal temperatures followed by a moderate cooling and showers later in the week and into the weekend. More extensive cooling is possible by the end of next week. The Commitments of Traders Report for the week ending August 18th showed significant net selling by funds. Index funds were net sellers of 1,861 contracts while trend following funds were net sellers of 21,132. This took the trend-followers’ net position back into negative territory at net short 1,485. Taiwan’s Maize Industry Procurement Association is tendering on Tuesday of this week for 56,000 to 60,000 tonnes of corn from either the US or Brazil.
CASH NEWS AND TENDERS: Thailand is tendering to sell 790,000 tonnes of corn today according to officials there. Of that total 500,000 tonnes is intended for export while the remaining 290,000 tonnes could be sold domestically.
WEATHER: Weekend weather was mainly as expected – drier and cooler. Forecasters are expecting a warm up this week with increased shower activity that may start to usher in the next cooling period in the Midwest by late this week and into this weekend. More significant cooling is possible by the end of next week. There is still no killing frost in the forecasts despite intermittent cooling into the first week of September.
TODAY’S GUIDANCE: The short covering rally in corn is being boosted by strength in soybeans and fair-to-strong export demand in corn, but it looks to be just a temporary pause on the way down. Barring an early frost, supportive demand is about to be overwhelmed by a near record large new crop. And despite some improved economic sentiment in recent weeks, consumer demand for meat is likely to remain soft which will keep a heavy lid on feed profitability. These are major, long term bearish fundamentals that go beyond any temporary oversold conditions. The selling that will be needed to take us lower will come from farmer hedgers and, possibly, trend-following funds. Light, first support remains near 318 to 320 in December corn with the next support at 311 1/2 and then 302 1/2. Resistance is at 344 and 349 1/2.
TODAY’S MARKET IDEAS: Traders can still sell either December futures or December calls on a bounce to the 342. The next downside objective remains at 291 1/2.
