Afternoon Corn: New crop gained this week while old crop lagged

Afternoon Corn:  New crop gained this week while old crop lagged

The corn market relaxed Friday after a relatively strong week of gains for new crop. July Corn finished the day ten cents lower, while new crop Dec only lost four cents. The weekly chart will reflect gains of only two cents; the Dec contract outperformed, finishing 28 cents higher for the week and briefly traded into a new high overnight. Cash trade was generally weaker today, headlined by five cent loses in some Gulf time slots.

CFTC Supplemental Commitment of Traders data after the close found a surprisingly large amount of fund liquidation heading into the May WASDE report. For the week ended 5/10 (Tues), large non-commercial (aka "fund" or "large spec") traders were net sellers of 27,498 corn. This was mostly long liquidation (21,586), though there were also a few new shorts (5,912). Commercials were the big buyers on the week, while the small non-reportable trader also kicked in a few net sales. When including recent activity, we think funds are heading into the weekend net long about 265,000 delta-adjusted corn contracts.

Overall, it was a light news day, allowing the trade to better digest the host of data points unleashed in the May WASDE yesterday. We feel it is important to keep in perspective that this particular report is extremely forward-looking and non-scientific, making it somewhat inadvisable to make a big stand on its contents. In other words, consume for 'entertainment' value only! To recap briefly, the USDA's first stab at 22/23 domestic carryout was 1.360 billion bushels, which compares to 1.440 billion for 21/22 (they left the old crop balance sheet completely unchanged from the April WASDE). Old crop world carryout moved meaningfully higher for a second consecutive report, pegged at 309.4 mmt vs. 305.5 in April. New crop (22/23) world carryout started slightly lower than 21/22 at 305.1 mmt. Interesting first stabs at 22/23 production include Ukraine, which at 19.5 mmt is down sharply from the prior year's 42.1 mmt for obvious reasons. They see major growth in South America (Argy 55, Brazil 126) despite concern over fertilizer availability?

The headline of the day was arguably CONAB correcting an error in their monthly crop report yesterday. Apparently, they intended to report a small reduction in the full year crop (114.6 mmt vs. 116.2 yesterday). Makes more sense to us then a 'near unchanged', given probable drought reduction to northern Brazil safrinha crops? Also on the world scene, dry weather in France is a double-edged sword; helping to get corn crops planted but reducing wheat/barley conditions off very high initial levels. In the end, the main event for the markets over the next week or so will likely be U.S. planting progress. There should be a good amount of corn planted this weekend, particularly outside of the Dakotas; the 6-10 & 8-14 day outlook map is both warm and wet, suggesting somewhat uneven progress thereafter?

Elsewhere, end-user markets were mixed; hogs rebounded sharply, feeders were a little better, while cattle/dairy/ethanol were all a little lower Friday. There were no 8 AM corn sales today after China snuck a flash through late yesterday (612k, mostly new crop). May futures expired at noon today; few fireworks for corn, though soy ran sharply higher? Outside markets ended the week with a nice relief rally; stocks and crude sharply higher, US Dollar a little lower. Despite the adjustment today, the US Dollar ended the week at its highest level in more than one decade. Ordinarily, this would present a major headwind to commodity prices, but we have bigger fish to fry!

In the options, volume was easier heading into the weekend. Calendar spreads continued to weaken. Corn lost ground to both beans and wheat today. Old crop corn continues to find resistance near $8 first, then $8.25 CN. We would expect strong support to surface on a break down to $7.50. New crop (CZ) briefly erased recent highs ($7.57) before settling back, so we will still call this initial resistance. The post-report pop leaves behind $7 as good support for CZ. Momentum indicators are mixed/indecisive, and we are not really overbought or oversold yet in either old or new crop.