Afternoon Corn: We taught the world to grow corn!

Afternoon Corn:  We taught the world to grow corn!

The corn market did an excellent job of lulling everyone to sleep Monday. The bear came out with all guns ablazing today, supported by bearish production ideas both here and abroad. Futures would finish the day with 8-9 cent losses. Dec futures made a new contract low, and Sept finished within a dime of the weekly continuation lows from March. Managed Money added to their shorts today, and we believe they are heading into tonight net short 180,000 combined futures and options. Cash markets were weak at the Gulf, while most interior locations were steady.

With weather relatively non-threatening and private U.S. yield estimates angling up to, or even slightly above, trend-line USDA yields, the bull had his work cut out for him this week. We also noted a growing parade of higher international crop estimates, too. Ukraine's grain lobby group was estimating a nearly 10% yr/yr boost to corn exports to 33 million metric tons (mmt), or about 1.3 billion bushels. The country's total corn crop was forecast at 38.9 mmt, up from 36.8 mmt last year. Later in the session, AgroConsult said they expected next season's Brazil corn crop to come in just over 110 mmt, versus estimates of 101 for this season's. They saw first crop acres close to unchanged, but expect better yields and more safrinha plantings to boost total output.

As noted above, U.S. weather does not hold much feature. Seven day map runs overnight did put a little more moisture in the Western Belt. Eastern Belt has received million dollar rains over the past several days, and with cooler temps, will hold onto more of it. 6-10 & 8-14 day maps were little changed this afternoon, and suggest a warm-up in store looking out to next week, but rain odds are average-to-above, particularly for the East.

The weekly EIA report tomorrow is unlikely to be quite as exciting as last week's. We suspect ethanol production will follow-up last week's surge with a much smaller bounce this outing, call it up 1% or less wk/wk. Demand is likely to hold just about steady, or perhaps dip slightly. With this in mind, we would look for ethanol stocks to put in another modest build of about +1% wk/wk. Ethanol futures finished the day a penny or two lower, though with corn down as much as it was, net margins improved. That being said, we still think most ethanol producers are losing about 5 c/gal, or 10-20 c/bu, in the spot going home tonight.

Elsewhere, end-user markets were mostly weaker today, excepting some 2020-dated hog futures. Sept Dairy finished limit lower at expanded limits? Sept Dairy futures have lost roughly 25% of their value over the past few weeks. The U.S. Dollar Index tried to keep its bounce going early, but ended up finishing the day lower. No new 8 AM sales today. Non-China corn export interest remains sluggish.

In options action, volatility was firm today on the push to new lows. Sept added 2% today. Early, players paid 2 cents for 2,000 Sept $3.05 Puts. Another house bought 500 red dec 360 puts vs selling the 400 calls paying 12 3/4 to 13 cents. Calendar spreads were weak; U/Z traded to new lows. Corn lost a little ground to the beans, but was mixed versus the Wheat (gaining on Chi, losing to MPLS, even on KC). CZ initial support at Dec contract lows quickly fell by the wayside today. The next chart level to watch is the weekly lows of $3; Sept was eight cents away on today's lows. The recent market gap lower remains open, which at this point would suggest $3.43 CZ will represent tough initial resistance going forward. Weekly chart indicators lean negative, while the daily decisively turned back lower, but is not far away from being 'oversold'.