Afternoon Corn: Futures show stability ahead of crop tour season

Afternoon Corn:  Futures show stability ahead of crop tour season

Though it was probably not the most ideal outcome, the corn market did manage to snap its post-report losing streak today. We say "not ideal", as the market closed only a penny or two higher up-front, and a more robust overnight rally attempt did not pan out early. Still, the bear had a window to potentially run some stops mid-day with a break below the prior day's low, but likely consumptive buying lifted the market back to positive territory. Managed Money traders were viewed small net buyers today but are believed to hold their first net short position in corn since May. The CFTC will opine on this tomorrow afternoon, and will include trade through the USDA report.

While there was not a lot of specific bull fodder around intraday, the corn market was oversold (RSI near 20), bruised, contused, and due a bounce. After the close, we did get a timely reminder that not all is right in River City with this year's crop. A "Digital" (whatever that is) Yield Tour sponsored by DTN and Progressive Farmer found yields in IL, IN, and OH, that were significantly (12-15%) below the USDA estimates offered up Monday. Day 1 and Day 2 did find yields that were close to USDA estimates in points further West, but that is not surprising either. While we are not sure of the tour's track record, on-the-ground reports suggest similar issues. Next week is "crop tour week"; similar results are suspected, and could very well shift the narrative for a time away from the USDA? Stay tuned.

Weekly export sales continue on their "new normal" trajectory; old crop sales were a paltry 56,100 metric tons, while new crop was a slightly more respectable 307,600. We were looking for something just under 500k combined, so close enough! China rolled an old crop cargo to new crop? Just over three weeks remain in the 18/19 marketing year, and total sold + shipped is barely on track to hit 50 mmt, assuming we ship everything sold. Need over 53 mmt to meet USDA sales forecasts. 4.38 mmt of new crop corn is on the export rolls, which is well behind last year, but is very close to levels seen two years ago, so not horrible. In the "here and now", U.S. corn has made strides in recent days to improve export competitiveness, but has not quite made it a slam dunk just yet, in our opinion. Falling South American currencies are not helping.

On the weather front, some beneficial moisture has occurred in the Midwest recently, which has helped exert a bearish tug, but there will be pockets of missed rain that will continue to be a concern. Cool temps in the northern Midwest over the next couple of days will slow crop development rates some? 6-10 & 8-14 day maps are warm with average-to-above precip odds. Extended NOAA outlook maps today were interesting, shifting to an "average-to-below" temp bias for Sept days, particularly for the Northern Plains? That will no doubt reinvigorate the frost bulls!? Analysts in EU and Ukraine slightly raised feed grain (corn and barley) crop estimates today. Argentina thinks farmers will expand corn acres 7% in the coming crop year.

Elsewhere, livestock pulled back some - fat cattle steady, feeders higher, and hogs lower. Dairy continues "Steady Eddie". Ethanol finally bounced a little today, dragging the 'crush' off a two-plus month low. Still see ethanol producers losing about 10 c/gal, when including all costs. Chicago Fed report today suggested financial stress at the farm level with loan difficulties rising to new recent highs?

In the options pit, volatility was steady to perhaps a little better. Players paid 6 cents for 1000 dec 410 calls. Spreads were firm today, adding a little stability, too. Even the U/Z roll popped a penny. Corn gained on the beans but was mixed on the wheat. Technically, the breach of key $4 Dec Corn support has established that as very difficult resistance looking forward. The bear filled the old May chart gap and was likely eyeballing the May lows -- $3.64 CZ, $3.53 CU. Got to $3.58 CU today - close enough for gov't work? Tentative initial resistance starts just below $3.70 CU.

KJ