Afternoon Corn: West vs East disparity apparent in corn crop condition report

Afternoon Corn:  West vs East disparity apparent in corn crop condition report

Weather-sellers were out in full-force overnight, but the day session proved considerably more contemplative and two-sided. July Corn would finish four cents higher, Sept was down 6 cents, while Dec fell 9 cents. Overall, the markets put in 25-30 cent ranges up-front, finishing toward the top-end of it. Cash trade was steady/mixed to start the week.

Rains were falling in June days; thus, overnight markets were knee-jerk defensive. Weekend precip favored the Eastern Belt in particular, which is (and will likely continue to be) a familiar trend. Major dry spots in North Dakota, areas along the IA/NE border, and S WI, made do with one-half to one-inch rains, which were very welcome but will not cure all ills. Parts of IL/IN/OH/MI received up to 2-3 inch totals. Much of South Dakota, SW/SC Minnesota, NW IA, N KS, and the upper two-thirds of Michigan went completely without meaningful rain? Rains for the next seven days are expected to play-out similarly; plentiful Des Moines on East, effectively, while the Western one-third of the Belt (and MN) miss-out. Temps cool-down for a few days, but warm back-up by mid-week. The current set-up may present a puzzle to the markets; certainly not a disaster with strong yield potential in the East, but also difficult to get a trend-line yield (or better) with many of those key states begging for moisture.

Crop Progress data this afternoon found the expected deterioration in crop ratings. Through this weekend, the USDA pegged national corn crop ratings at 65% Good-Excellent (-3% wk/wk) and 6% Poor-Very Poor (+1% wk/wk). This compares to 72% G-E and 5% P-VP this time last year. The market was expecting a 2% decline in G-E. Iowa, Minnesota, and South Dakota, all saw G-E ratings fall sharply (-7%, -8%, and -11%, respectively). There was modest improvement in the East (MI +5%, OH and PA both up +4%). Given the rains discussed above, we would expect IL (-4% this week) to stabilize, while WI, IN, and other Eastern-situated states should improve. The West will likely continue to deteriorate for the most part? The USDA will publish its first national silking progress report next week.

CFTC data after the close, delayed one business day due to "Juneteenth", played-out close to expectations for once. Large non-commercial (aka "fund" or "Large Spec") traders were net sellers of 23,542 contracts, effectively all of which was liquidation of existing length. Small traders were also fairly large net sellers, while the Commercial was the buyer. In the case of the commercial, it was pretty much all short-covering. Effectively, a lot of evening-up, which one would expect given the recent upswing in volatility and the onset of summer weather markets. When including recent price action, we believe the funds are heading into tonight net long roughly 200,000 corn futures and options.

Today also featured the Grain Inspections data, which continued along recent trends for corn. For the week ended 6/17, U.S. exporters shipped 1.481 million metric tons (mmt) of corn, which was down from 1.611 mmt the prior week (upwardly revised), and 1.306 mmt shipped the year ago week. China was the largest single taker, accounting for over one-half of the total this week. YTD corn inspections stand 55.5 mmt, versus 32.1 mmt exported at this time last year. Nearly eleven weeks to go in this marketing year; need to ship out 18.5 mmt more to meet current USDA sales projections.

In the options, volatility took a hit coming out of the weekend. Players sold 1,000 Dec $6 Calls at 44 cents and 500 Dec $5 Puts at 30 cents. Another house paid 6 cents for 800 Aug $6.50-7.00 Call Spreads. Calendar spreads were very firm up-front, though new crop positions featured a little switcheroo with 22/23 marketing year gaining on 21/22. Corn lost ground to the beans, but was more mixed (but mostly weaker) versus the wheat. Technically, the markets remain respectful of recent highs and lows. In CN, that support comes in just above $6, while resistance is seen just below $7. Ditto CZ, with resistance near $6 and support above $5.