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NEAR-TERM MARKET FUNDAMENTALS: Outside markets and favorable crop weather pushed the corn market substantially lower overnight according to traders. Although some analysts are predicting an acreage number below the USDA’s current total of 85.0 million acres on the June 30th Acreage Report, one analyst noted that improving weather could also potentially result in a boost in the USDA’s projected yield per acre on their subsequent July Supply/Demand Report. Excess rain continues to be a problem in parts of the central and north central Corn Belt with moderate unwelcome rains forecast in the area over the next three days. However, warmer temperatures are boosting crop prospects and weather forecasts are largely eliminating last week’s expectations of a dome of very hot air settling in over the Midwest during the last week of June and into early July. The Commitments of Traders Report for the week ending June 16th showed that funds were large-scale sellers overall. Index funds were net buyers of 7,301 contracts while trend-following funds were sellers of a whopping 40,590 contracts to decrease their net long position to just under 92,000 contracts. South Africa reports that its corn stocks at the end of its 2008/09 marketing year stood at 1.585 million tonnes, up from 1.049 million at the end of the 2007/08 marketing year.
WEATHER: Rain continued through the weekend from the NW corn and soybean belt into the north central Midwest. The next three days are expected to bring added rain with the heaviest amounts centered on northern Iowa and southern Minnesota and more moderate amounts blanketing the rest of Iowa, all of Wisconsin and the NW corn and soybean belts as well as much of Illinois and Indiana and on into parts of Kentucky and Tennessee. Ninety degree temperatures are expected today in all of the western Corn Belt and most of the NW as well as most of Illinois and the mid south and all of the Delta. The hot weather is expected to shift gradually east tomorrow and cover all of the Midwest by Wednesday. Longer term forecasts have largely eliminated the possibility of a hot weather “dome” over major growing areas.
TODAY’S GUIDANCE: The corn market and crop weather are largely following the pattern seen during last year’s planting and growing season. Both years saw a run up in prices into May and June based on wet weather and late planting. This was followed last year by a sharp setback once the crop was finally planted and it became clear that growing conditions were very favorable. The major differences this year has been that the wet weather was farther east and the setback started earlier in the year and at a much lower level. Of course, last year the weather-related downtrend during summer was greatly extended by an economic panic in late summer and into the fall, and we do not expect a repeat of that part of the pattern. In fact, given the continued strong export sales in corn this year, and the fact that the recession is already priced into the market, we do not expect the sort of extended downtrend seen during the last half of 2008. The next support level is down near 390 in the December contract which is just below the lows of late April. Resistance is near 418 and then at 427 1/2.
TODAY’S MARKET IDEAS: The market is in the process of shedding the weather premium built up over the course of a wet spring. The possibility that trend-following funds might reverse course and become consistent net sellers in corn in coming weeks is a potentially major problem that could result in a test of the December lows. However, we expect to stop short of those lows and remain in a broad range between 396 on the low end, and 450 to 460 on the high end in the December contract.
