Afternoon Corn: South American export ideas contribute to modestly lower week

Afternoon Corn:  South American export ideas contribute to modestly lower week

The corn market finished a down week with modest losses, settling 3-4 cents lower across the board. The weekly chart will reflect 16 cent losses. Cash markets were steady at the Gulf, while interior markets maintained this week's trend of firmer prices.

CFTC Commitment of Traders data after the close was interesting, finding large non-commercial traders (aka "funds") mostly stood pat on the week. For the week ended 5/17, funds were net buyers of 1,392 contracts, which included 12,354 new longs and 10,962 new shorts. Commercials were sellers on the week, while small non-reportable traders were the largest single buyer. When including recent activity, we think funds are heading into the weekend net long 235,000 delta-adjusted corn, which was slightly less than we were expecting pre-report.

As we've been discussing, recent weakness can likely be attributed to a solid week of planting progress in the U.S. Midwest, though there is certainly more work to do, particularly in the NW quadrant of the Corn Belt. Argentina was also out early today saying they may raise their limit on corn exports for the season to 35 mmt, which is up from 30 mmt today and the 25 mmt originally imposed earlier this year. Both Mato Grosso (Brazil) and France are seeing hot and dry weather, but at least in the case of the latter, it has allowed their farmers to rip in corn (now 98% planted). We think the dryness in Mato Grosso has probably shaved-off 4-5 mmt in corn production potential, though we are still looking at a total Brazil crop that is ~30 mmt (or 1.2 billion bushels) above last year.

Outside markets were somewhat choppy today. An unexpected (and large) interest rate cut by China overnight led to an early 'risk-on' bid, but gains in equities in particular fell by the wayside. The S&P 500 was drifting into official bear market territory on the day's lows, but a late rebound pared losses. For the week, equities finished lower, as did the US Dollar. Crude Oil gained $2 and metals also rebounded.

Elsewhere, end-user markets ended the day along the week's trends; hogs sharply higher, cattle weaker, and dairy/ethanol about steady. Cattle on Feed data after the close will likely be considered a little bearish Monday; "On Feed" came in at 102% (101% expected), with placements at 99% (95% expected). Poor pasture/range conditions are likely forcing ranchers to run through cattle more quickly than they would like? Export news was very quiet this week, though what little tender business there was tended to go to southern hemisphere sellers.

In the options, volatility was easier heading into the weekend. June options expired without much controversy (lots of $7.80 Calls will expire worthless). Calendar spreads ended a recovery week a little weaker. Corn lost to the beans but gained on the wheat, which has been a trend since Monday. Old crop corn continues to struggle some with pushes above $8, which stands as resistance. We would expect strong support to surface on a break down to $7.50, but more immediately near recent lows of $7.70, which we did glance on the week's lows. New crop (CZ) is breaking down initial support ($7.40); recent lows of $7.10 stand as an important level to hold for market bulls. Monday's high ($7.66) becomes new resistance for CZ. Momentum indicators have turned lower, and we are not yet oversold.