Afternoon Corn: Only second positive weekly close out of the last nine

Afternoon Corn:  Only second positive weekly close out of the last nine

The corn market finished Friday with small penny-plus gains. True, today's price action did not set hearts racing, but weekly gains of ~13 cents are welcome after finishing lower seven out of the last eight weeks! The expiration of the Sept contract at noon will also give the weekly chart an extra 13 cent boost on top of this, which will quickly leave this week's close ($3.55 ½) in the dust. Cash trade was firmer more often than not Friday, though some Eastern Belt processers were able to lower bids a notch.

CFTC Commitment of Traders data after the close found roughly the expected amount of fund selling in corn. For the week ended 9/10 (Tues), large non-commercial (aka "fund") traders were viewed net sellers of 26,861 corn. A deeper dive into the data confirms this was almost all new short positions, not liquidation of existing length. Index (or "long-only") funds were also net sellers of 26,970 contracts. Small traders and commercials were the buyers. When including action this week, we estimate funds are heading into the weekend net short just under 150,000 combined corn futures and options.

Market 'buzz' was mostly a retread of Thursday. China was on holiday today, but sentiment from the warmer feelings this week continued. China did retract punitive tariffs on both pork and beans, which has stimulated positive market responses in both (in the case of hogs, two consecutive 'limit-up' performances). The USDA walking back yield and production expectations also helped stop the "sinking" feeling underneath corn and may re-focus attention on just how far prices have declined. $3.50 corn has often been considered a 'value area' for corn in recent years, and this fact is likely not lost on the end-user crowd?

Weather remains in a familiar holding pattern. 6-10 & 8-14 day maps are still suggesting above average temps into the final week of this month. Sunday night's update will carry us through into months' end, so will be worth a glance. The 8-14 day map is bone dry, as is the five day outlook. Welcome in areas with mature corn (will help things dry down), but later-planted corn in the South-Eastern Corn Belt could have used another shot of rain to fill out ears? South America is trending dry, but it is very early in the planting season.

As we went to press, there were rather vague media reports of Trump planning biofuel mandate hikes to "offset" the small refiner exemptions. This would suggest a substantially greater effort than the ~5% increase floated a couple weeks prior? The market did not react much; ethanol finished up a penny, while RIN's gained another 1-2 cents. Technically, that 1-2 cent daily gain is a 10% increase, albeit off a very low base! If the White House does decide to fully reallocate lost gallons, it would help draw down RIN stocks accrued due to the larger exemptions granted since Trump took office. Over time, this should help expand retailer interest in offering E-15, boosting domestic ethanol demand beyond the 10% "Blend Wall"? The ethanol crush finished the week little changed, maintaining small net losses for most Midwest production facilities.

In the options pit, volatility was weaker again in a very quiet day of trade. One player paid 1 to 1 1/8 cents for 1000 dec 420/450 call spreads and 2 3/8 for 500 dec 380/390 call spreads. Another house bought 250 march 400/450 calls, vs selling the dec 370 calls, paying 4 1/8 net. Calendar spreads were mixed up-front, but firmer between crop years. Corn was even on the beans, but gained a little on the wheat. Technically, Dec Corn has now quite firmly established $3.50 as major support. On the resistance side, there is a fair amount of overhead between $3.75 and $3.80, and beyond that, the August crop report gap area in the low $3.90's looms large. Daily indicator direction is now solidly positive with today's outside day up. Sunday night's open should "leave a close" on the weekly chart.