Afternoon Corn: Condition dip could offer the bull (temporary?) overnight boost

Afternoon Corn:  Condition dip could offer the bull (temporary?) overnight boost

Though the early-going was less than confident, corn started the week off on the right foot, finishing four cents higher. The bull will likely try to build on those gains after tonight's Crop Progress report arrived better-than-expected. Managed Money traders were viewed net buyers of 10,000 corn in an overall quiet session of trade. We would estimate they are heading into tonight net long about 80,000 combined futures and options.

Crop Progress data after the close featured a few surprises. Perhaps the most significant was a -3% wk/wk decline in national corn Good-Excellent ratings to 56%. The market was expecting them to hold about steady; this also compares unfavorably to year ago ratings of 77% G-E. The Eastern Belt took the brunt of the damage, which was fairly unsurprising - Ohio ratings were off 14%, Indiana down 7%, and Michigan fell 6% G-E. Note, it is still very early, and we see this as an extension of the "planting delay" issues that have played out over the course of the past month and rallied the market more than $1/bu. Still, it will be a feature overnight, no doubt. The final planting report found 96% of the corn planted, with the bulk in the East and South Dakota. 89% of the crop was emerged at the end of June. Weekend weather featured big (flooding?) rains along the MO/IA border and other extreme southern Midwest crop areas, but roughly half the Midwest was completely dry. The next five days bring scattered showers (and light accumulations) for most of the Midwest, excepting Wisconsin, which could get up to two inches over the period. Growing weather ahead likely leans a little bearish; rains return in week two after a short-run dryer stretch. Temps warm up to 80's and 90's middle/end week, which will add some GDD/GDU's.

The biggest market event fireworks are likely yet to come this week. The headliner will be the USDA Acreage and Quarterly Stocks reports Friday. Given the well-publicized issues with planting (see above), the acreage information will likely be quite dated? Quarterly Stocks will be interesting, as all of a sudden, the market almost needs to maximize carry-in to help meet 19/20's domestic demand. In addition, we also have First Notice Day for July futures on that day; "position day" is Thursday. There is also the long-awaited Trump (U.S.)-Xi (China) meeting at the G-20 into the weekend.

The mid-day grain inspections report was fairly pedestrian, showing 617,740 metric tons in corn shipments for the week ended 6/20. That was down slightly from the prior week, and paled in comparison to the 1.54 mmt shipped out the prior year week. To no surprise, 18/19 corn shipments of 41.5 mmt are falling further behind 17/18's back-end loaded pace of 44.2 mmt. It wasn't all bad news, though; a cargo of corn was shipped out of the Gulf to Mainland China? There are some open sales on the books to them, so it may not be an error.

Elsewhere, traders continue to punish the hog market, which finished over $3 lower for a second consecutive day. Cattle were a touch weaker, as broadly expected, after Friday afternoon's Cattle on Feed report uncovered a few more animals around. Ethanol and Dairy were slightly better today; margins slightly negative in the former and slightly positive in the latter. AgRural pegged Brazil's second crop corn harvest at 19% harvested, which compares to 7% average.

In the options pit, volatility was steady to perhaps a touch weaker. July option expiration Friday no doubt wiped out a lot of positions, though open interest declined about 30k. Players sold 500 sept 500 calls @ 12 1/2 covered vs 452 futures. Another house paid 8 1/4 for 2000 dec 400 puts. Calendar spreads were firm; N/U rebounded into the close. Corn was even on the beans, but lost to the wheat for a second day. Technically, we have established strong support at the old late May corn gap ($4.20 CZ), with initial support moving up closer to $4.50 CZ. Holding that initial support level will be important this week. Last week's highs ($4.64 CN, $4.73 CZ) will be important resistance moving forward.

KJ