Afternoon Corn: Harvest offtake likely reflected in the spreads

Afternoon Corn:  Harvest offtake likely reflected in the spreads

Macro concerns dominated the day, headlined by a near 1,000 point drop in the Dow and sell-offs in industrial commodities such as Crude Oil and Copper. The corn market acquitted itself fairly well, overcoming an overnight sell-off that reached double-digits on the lows, to finish only 4-5 cents lower up-front and 1-3 cents lower in later-dated positions (such as 'red' Dec '22). Managed Money traders probably sold out a little corn today, which would leave them net long an estimated 155,000 delta-adjusted contracts. Cash trade was a little better at the Gulf, while the interior leaned steady/weak.

The popular excuse behind today's financial market weakness was rising default risk in large Chinese property developer Evergrande. Without a bail-out, it is likely the company will go under, along with some $300 billion in liabilities? In truth, it felt like the stock market was looking for an excuse to correct; it has been over one year since it has seen a correction of 5% or more. There are also a number of 'uncertainties' coming up, including an FOMC meeting later this week. The Fed is expected to discuss plans for scaling-back bond purchases (aka QE, or "money-printing"). Though, with traders debating the potential for 'contagion' surrounding the Evergrande event ("Lehman moment" was used more than once on cable news), markets with heavy ties to China - Crude, Copper, and yes, Soybeans, took the brunt of today's risk-off selling.

USDA Crop Progress data after the close played-out close to expectations. The USDA reported the national corn harvest at 10% complete, which is slightly ahead of last year and the five year average. The lion's share remains outside the traditional Midwest, or on the very southern fringes of it. 57% of the corn crop is mature (10% ahead of average), while 93% is dented. Condition ratings saw a late season bump, with Good-Excellent (G-E) rising +1% wk/wk to 59% G-E nationally, while Poor-Very Poor (P-VP) was unch wk/wk at 15%. Overall, both are close to 2020 levels (61% G-E & 14% P-VP).

The next three days look to be a little damp across the Midwest, which may slow the steady drumbeat of harvest for a spell. Beyond, weather continues to look very favorable; 6-10 & 8-14 day maps are both exceptionally warm and dry across the Midwest. Just what the doctor ordered for expanding harvest! It's also the season to start looking at planting prospects in South America; southern Brazil has featured the best conditions to date, though there is some speculation the monsoon could start soon in the dryer center-west and center-south. Argentina is just getting started; most expect a rather sizable bump in corn acres there this year.

Elsewhere, end-user markets also did a decent job of shaking-off the macro pressure. Only hogs finished materially (either side of $1) lower. Ethanol was soft early but managed to finish only one penny or so lower. We still see excellent spot profitability, though booking it forward beyond November is nigh-impossible. U.S. export news remains quite scant for corn; no 8 AM sales, though to be fair, Asian markets were on holiday today. Corn inspections saw an encouraging bounce mid-day; 403,104 metric tons of corn were shipped w/e 9/16, up from 160k the prior week, but still less than 768k the prior year week. There was no corn shipped off the PNW, but China took 140,245 metric tons of corn out of the Gulf.

In the options, corn vol was a little better today. CSO's were popular. Calendar spreads were weak, likely reflecting some harvest offtake. Corn gained on both the beans and the wheat again. $5 stands as Dec Corn support, though we suspect users will be there to pick-up some corn initially at $5.15-5.20. Indeed, that level did hold today. Initial resistance is still operative around $5.35, which the prior week rally. Pushing over this level would project a further run to old overhead in the $5.45-5.50 area, basis CZ.