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NEAR-TERM MARKET FUNDAMENTALS: Prospects for drier weather and a mid-week warm up helped to pressure the grain markets overnight. Traders said that selling also came after increased selling in the cash market by farmers last week and ideas that farmers may also be sellers to start the current week. One analyst also noted that index funds were net sellers in agricultural commodities into last week, after being consistent buyers in previous weeks. However, although the Commitments of Traders Report for the week ending 5/12 showed small-scale net selling by index funds, it also showed a massive shift to the long side by trend-following funds. Index funds were net sellers of 2,135 contracts amid general moderate selling in agricultural commodities by investors. Trend-following funds were net buyers of a whopping 55,794 contracts to increase their net long position to 64,465. Planting progress is expected to pick up in some drier areas of Illinois and Indiana this week as dry conditions and mostly warmer temperatures dominate in those states through Thursday. An agricultural association in Taiwan will tender for 56,000 to 61,250 tonnes of US corn on Wednesday with another private group looking to buy 23,000 tonnes of US corn on Thursday. The Philippines bought a total of 56,800 tonnes of corn from Brazil and Indonesia according to traders. Corn prospects may be improving in Africa where Zambia’s Minister of Agriculture is projecting a record surplus over 200,000 tonnes that may allow the resumption of exports to the region. In addition, farmers in Kenya are said to be getting ready to plant genetically modified corn according to a local newspaper. This comes amid protests against the use of GMO seed, but the fact that millions of Kenyans face chronic hunger may be the tipping point in favor of the use of more productive GMO seed there and that should boost yields. Ethanol profitability declined last week as higher corn prices outpaced a modest increase in the price of ethanol. The USDA will release its latest Crop Progress reports this afternoon, and traders look for the report to show slow progress in Illinois and Indiana again last week.
CASH NEWS AND TENDERS: An agricultural association in Taiwan will tender for 56,000 to 61,250 tonnes of US corn on Wednesday with another private group looking to buy 23,000 tonnes of US corn on Thursday. The Philippines bought a total of 56,800 tonnes of corn from Brazil and Indonesia according to traders. Iran is tendering for 100,000 tonnes of South American corn.
WEATHER: The latest rainy pattern exited the eastern Midwest on Sunday after dry weather started spreading into the corn and soybean belts from the NW along with the cold temperatures. This system produced frosts starting in the NW Midwest into Saturday morning, moving into the north central Midwest into Sunday morning and the parts of the extreme NE into this morning. Warmer temperatures are forecast by Tuesday with a significant push of warmer air by Wednesday. This is expected to last through Thursday, but some weather models switched over to a much wetter pattern for the Memorial Day weekend and into the last days of May. In addition, we may see a line of rain showers in The NW Midwest tomorrow and again on Thursday. A look at the 7-8 day record of rainfall shows substantial rains in SE Iowa, northern Missouri and much of Illinois and Indiana as well as southern Oklahoma and SW and southern Arkansas.
TODAY’S GUIDANCE: Despite increased wetness and planting delays in Illinois and Indiana over the past week, the market is focusing on the drier weather that has spread from west to east over the Midwest during the past 2-3 days along with a forecast for mostly dry weather during much of the coming week. Some selling by index funds may have also cooled off the bulls to start the week, and it now remains to be seen whether farmers will be spooked into an increased rate of selling. With many farmers busy in the fields and very good export demand in the news last week and new sales on the wires this morning, cash market selling may come in fairly short bursts. Support starts at 402 1/2 in the July contract and extends down to near 395. First resistance is at 415 3/4 with the next resistance at 427 1/2.
TODAY’S MARKET IDEAS: With no rain in the forecast this week, the weather influence is about as negative as possible. If producer selling intensifies, July could come under heavy selling pressure as well. However, tonight’s crop progress reports might slow the selling and the focus may soon shift away from plantings and to a bullish supply/demand outlook.
