Afternoon Corn: The bull-bear tug of war continues

Afternoon Corn:  The bull-bear tug of war continues

The corn market 'tug of war' continues. Futures got off to an ugly start overnight, leaving the prior day's close and trading almost 15 cents lower on the lows. The market began to pare losses into the biscuit break, and this failure to extend helped the market 'melt back up' most of the morning. The recovery ran out of steam into the final hour though; July Corn would finish the day 7 cents lower, while other positions ended down around 4-5 cents. Funds were estimated net sellers of another 5,000 lots today, which would leave them net long 215,000 delta-adjusted corn. CFTC will be out tomorrow after the close with a positioning update in front of the long weekend. Cash trade was mostly steady today.

If looking for an excuse to rally, the weekly export sales report sure wasn't it. Old crop sales were just 151,600 (a new marketing year low for a second consecutive week) and new crop was a paltry 58,300 metric tons. Shipments of existing sales remains very active. Current sold + shipped for 21/22 stands 59.06 mmt, which is 93% of the USDA's current sales goal, and compares to 68.58 mmt on the books this time last year. Overall, the corn market has taken a few body blows this week on the export front (China-Brazil + Ukraine food corridor rumors) and is weathering it fairly admirably.

Skies remain clear in the Western Corn Belt for another day or two, after which we start seeing more significant shower activity. It will be interesting to see if farmers in ND and MN were able to mud corn in; if not, they will likely be forced to consider other alternatives as we get into June days? Maps are warmer and dryer in the Eastern Belt later next week? USDA today said it would allow voluntary termination of CRP acres in a bid to boost plantings. Likely 'too little, too late,' in our view for corn, but it may benefit other crops? The other major weather concern remains unchanged, that being Mato Grosso Brazil dryness. In sum, we still think Brazil crop estimates have probably been shaved by ~4 mmt, but that still leaves their total crop more than one billion bushels above last year.

Elsewhere, end-user markets were mixed; hogs sharply higher, cattle a little lower, milk and ethanol roughly steady. Outside markets were in a good mood today; stocks and Crude Oil were meaningfully higher, while the US Dollar was modestly lower.

In the options, volatility was a little firmer early but momentum waned as the session unfolded. Dec Call spreads were popular; 1,600 of the $7.20-8.70 traded at 38 ¼, and 1,600 of the $7.20-8.20 traded at 29 1/8th. Calendar spreads were soft. Corn lost a lot to the beans and a little on the wheat. Not often you see corn lower on the day when traders have to ask where soybean trading limits are at? Old crop corn continues to struggle with pushes up near $8, which stands as stiffening resistance. We would expect initial support to surface around $7.50, which we have neared the past two sessions. New crop (CZ) broke-down initial support ($7.40) last week, which becomes new resistance for that contract. Recent lows of $7.04 stand as an important level to hold for market bulls, which they have done two consecutive days. Momentum indicators remain tilted lower, and we are nearing oversold, but not quite there yet.

KJ