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NEAR-TERM MARKET FUNDAMENTALS: The lack of heat in the forecast for the Midwest is seen as ideal for the tail end of the pollination process, but traders still have concerns with the cool weather as crops are behind a normal schedule. However, speculators may not be patient enough to trade the market from the long side hoping for an early end to the growing season. Traders believe that normal weather after pollination could result in a massive yield for the US. Demand for ethanol and demand for livestock feed for the coming season are in question with weaker energy prices and another sharp break in hog prices this week. Senator Grassley from Iowa is questioning the Obama Administration’s position on imported ethanol tariffs given that the nominee for ambassador to Brazil has expressed interest in dropping the tariffs. December corn closed moderately lower on the session yesterday. Strength in soybeans helped support the market early, but a reversal from lower to higher for the US dollar, the nearly ideal weather outlook, weakness in energy markets and a sharp drop in metal markets helped contribute to the bearish tone. Concerns over the potential knee-jerk reaction of fund traders during CFTC hearings to limit speculative limits for energy and agricultural markets may have helped pressure the market as well. Crop conditions deteriorated slightly in the past week, but 70% of the crop is in good to excellent condition from 63% as the 10-year average, and 80% of the Iowa crop is still rated good-to-excellent. Pollination is still running late, with 55% silking vs. 76% as the 5-year average. If we assume a drop in harvested acres of 500,000 due to late plantings and use a yield forecast of 160 bu/acre, ending stocks would come in near 2 billion bushels, with a stocks/usage ratio of nearly 16%, up from 1.09 billion and 8.7% projected for the June USDA report.
CASH NEWS AND TENDERS: Gulf basis levels were steady yesterday.
WEATHER: The lack of heat in the forecast and a continued flow of precipitation looks like nearly ideal crop weather for the developing crop, especially with late pollinating corn in the eastern Corn Belt. The only area which may have some concerns about not enough moisture is still in the northwestern Corn Belt. If anything, the extended models may show too much cool weather across the Belt, which could keep development slow.
TODAY’S GUIDANCE: The weather outlook remains as the dominant bearish force for the market, and it appears way too early to worry about September/October weather. CFTC hearings on limiting speculation will be monitored closely again today, and with index funds holding 315,142 contracts net long, changes could be significant. Outside market forces are turning more negative. Until there is a more credible threat to supply, the trend looks to remain down. Selling resistance for December corn comes in at 338 1/2 and 347 3/4 with 305 and 302 as next downside targets.
