Afternoon Corn: Bull spreads leave Friday close with help from wheat

Afternoon Corn:  Bull spreads leave Friday close with help from wheat

Wheat was the star of the grain room today, and the corn market was not too proud to ride its coattails. July Corn finished 28 cents higher, Sept added 20 cents, while the new crop gained 16 cents. New highs for the Dec corn contract, while July is still twenty cents below its recent peak. Funds were estimated net buyers of roughly 10,000 corn today, which would leave them net long 275,000 delta-adjusted corn. Interior cash trade was mostly steady, while the Gulf was a little easier.

Surprise headline shocks notwithstanding (such as the India wheat export ban), the pace of U.S. corn planting should be the main driver of price action over the next couple of weeks. By most accounts, farmers were very busy late last week and the weekend. The next couple of days keeps most of the rain to the south and east; later this week, there will be a more significant storm in the Center of the Midwest and North Dakota. Temps turn a little more 'spring-like' after a week of summer temps, which may slow evaporation rates? This afternoon's 6-10 day map update did take some moisture odds down a notch? Crop Progress data after the close confirmed significant catch-up work had begun; 49% of the U.S. corn crop had been planted, advancing 27% wk/wk, though this would still leave it 29% behind last year and 18% below average. All Midwest states remain well behind; the most egregious are Iowa (-23% below normal), Minnesota (-37% below normal), and North Dakota (also -37% below normal). Given the above forecast, MN and ND in particular appear to have a tough road ahead?

The mid-day grain inspections report likely did not stimulate any passions. For the week ended 5/12, U.S. exporters shipped 1.037 million metric tons (mmt) for corn, which was less than the 1.477 mmt shipped the prior week, and 1.994 mmt the prior year week. YTD corn inspections move up to 39.1 mmt versus 47.3 mmt on the books this time last year. China was the recipient of two cargos out of the Gulf and a single cargo off the PNW; Latin America and South Korea made up the bulk of the remainder. Tender activity remains quiet; Taiwan is in for a cargo of optional origin corn.

Elsewhere, end-user markets were mostly 'bid' to start the week. Hogs jumped $3 after pressing to multi-month lows, cattle were about $1 better, and milk gained 2-3%. Ethanol did its best to keep pace with corn but fell a little short in the old crop; June CU finished the day 6 c/gal higher, though in crush terms, lost about 1 c/gal. We still think most Midwest plants can make ~15-20 c/gal profits today, net of all costs. Outside markets leaned mostly net positive; the US Dollar was softer (but remains near multi-decade highs) and Crude Oil was firmer. Mato Grosso stays dry, which will keep Brazil safrinha crop estimates angling lower?

In the options, volatility was firm, particularly up-front. July out-of-the-money puts were popular, as were June Calls (which expire Friday). Calendar spreads were very firm; July spreads left Friday's close behind after trading to a four month low that day. Corn gained on the beans but lost to the wheat. Old crop corn should find tough resistance around $8.25 CN. We would expect strong support to surface on a break down to $7.50. New crop (CZ) traded to new highs today; $8 should stand as psychological resistance. $7 remains good support for CZ. Momentum indicators are pointing higher again, and we are not yet especially overbought.