Afternoon Corn: Feel-Good Friday Rally

Afternoon Corn:  Feel-Good Friday Rally

Today could best be summed up as "Feel-Good Friday", as more than a few down-trodden markets came up for air. Corn's bounce was among the more impressive, posting 9-10 cent gains in the front few months. The bad news is, this barely made a dent in the week's overall ~40 cent slide. Cash trade was steady with a firmer tone; CIF bids also managed a bounce, popping 1-2 cents in spot slots.

CFTC Commitment of Traders data after the close uncovered a fair amount of fund selling in corn, though perhaps not as much as one would think given the price action. For the week ended 8/13, large non-commercial (aka 'fund') traders were viewed net sellers of 42,087 corn, which would take them to just 17,213 net long. Commercials and Index Funds were the net buyers on the week, while the Small Trader was a fairly large net seller (as the move likely ran stops and caused "margin call liquidation"). When including Wed-Fri estimates, we believe funds are heading into the weekend net long ~10k corn.

The focus of next week will likely be a series of private crop tours, the most well-known being the ProFarmer Tour. The prospect of a different view on crops allowed the markets some latitude to shift the discussion away from the USDA's bearish data over the past couple of days. Given the variability of crops (both in quality and maturity) and the well-publicized early issues, the tour will likely be given more attention than usual. Still, we feel it necessary to remind everyone that these tours are typically more for "entertainment" than for actual hard analysis. Take them with a grain of salt! For what it's worth, the DTN/Gro Intelligence "digital tour" projected a national yield of 163.2 bpa, which compares to the USDA's 169.5 bpa August forecast.

Weather influences lean mixed; far from perfect, but there are just as many good spots as bad. Rains over the past 24 hours tended to favor the Western Belt. The Eastern Belt, Iowa, and parts of MN, are all most in need of a good soaking. NOAA outlook maps removed most of the heat in the 6-10 & 8-14 day; the 6-10 day map is dryer, while the 8-14 day is wetter. French corn ratings were unchanged wk/wk at 60% Good-Excellent, down from 80%+ early season due to a couple hot/dry stretches. NE China has been a little too wet of late.

Elsewhere, livestock had a no-good, terrible, horrible week; the front months of cattle finished $8 lower and hogs $4 lower (including a 'limit-down' day in the Oct Fri). China's Ag Ministry fessing up to losing nearly one-third of the country's hog herd to African Swine Fever. Scary to think they are probably understating this? South Korea's KFA is poking around for corn; business still likely to go to Brazil, though we are certainly getting closer to the mark. Falling South American currencies are not helping! Ethanol managed to crawl back above $1.30 to end the week, though producer margins are still quite negative.

In the options pit, volatility was weaker, as today's rally took the heat off the bull. Calendar spreads were firm. Corn took home the Friday Cup, gaining on the beans and 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, which also takes away some technical zip (if that wasn't obvious enough already). The old spring lows and the gap appeared to offer support and is now the level to beat to stimulate more downside. Futures settled into tentative initial resistance Friday; we expect a tougher challenge awaits at the "report gap" near $3.90 CZ.