Afternoon Corn: Ugly end to an ugly week for CZ; it better rain!

Afternoon Corn:  Ugly end to an ugly week for CZ; it better rain!

The corn market certainly didn't feel a patriotic duty to rally today, finishing a down week with a down Friday. Dec Corn ended twelve cents lower today; for the week, that contract ended 66 cents lower. The weekly chart will diverge sharply from this reality, reflecting modest gains this week, as it is settled off the July contract which began the delivery process mid-week. Cash was steady on the interior, while the Gulf declined slightly for prompt.

CFTC Commitment of Traders data after the close confirmed our theory that much of the recent selling in corn was due to spec funds exiting length. Through Tuesday the 28th, large non-commercial traders were net sellers of 39,903 contracts, effectively all of which was liquidated longs (42,814 contracts; there was also 2,911 shorts that covered). Index (or long-only) traders also sold 17,567 contracts, likely reflecting liquidation of ETF's or similar instruments. Commercials were the offsetting buyers, likely reflecting exits of July hedges into delivery. Total open interest in corn was off 15.6% over the one week period! When including recent activity, we think funds are heading into the July 4th weekend net long less than 100,000 contracts for the first time since late 2020.

This week was proof positive that weather and fund liquidation can be a potent brew when acting in tandem. Indeed, we have a big three-day weather weekend coming; "million dollar rains" are in the forecast over the next week and the 6-10 & 8-14 day map bias remains warm and wet. The importance of these rains cannot be understated, as topsoil moisture has been depleted across much of the Midwest. These rain forecasts need to start becoming reality! Today was also the start of a new quarter/month; the CFTC report above affirms they were busy lightening-up on commodity length, and that appears to have continued today, too. Energy recovered some ground today, as did the stock market, but the US Dollar finished higher and both metals and soft commodities were defensive.

Elsewhere, end-user markets were mixed; livestock (particularly cattle) were better, while dairy and ethanol continued to sell-off. Milk had its worst week in over one year, and ethanol futures lost more than 20 c/gal. There were no 8 AM sales reported today; South Korea did buy a couple of cargos for Oct delivery (likely not U.S. origin). News wires were reporting that Mato Grosso second crop corn was 55% harvested? Private analyst Safras pegged Brazil's full year corn crop at 117.2 million metric tons, down from 118.1 prior forecast, but slightly higher than current USDA estimates. Markets are closed Monday for the July 4th holiday and will feature a 'hard' morning open on Tuesday. It will be an interesting one!

In the options, volatility was easier, both post-report and ahead of a long weekend. Paper was said to be buyers of 3,000 of the week 2 $5.80 puts for 2 to 2 1/2 cents; this is forty cents out of the money vs underlying Sept futures? Calendar spreads were firm up front with July continuing to rip, and Sept managed to gain a few on the Dec. Corn was the big winner today, gaining on both the beans and the wheat. Technically, Dec Corn remains under extreme pressure, closing under its 200 day moving average for the first time in awhile. New lows would likely have the bear key in on the late Feb lows near $5.80? $6.50 is shaping up as shaky initial resistance, then we see much tougher levels near $6.80-6.90 CZ. New crop corn remains very oversold, with the CZ RSI closing the week right at 20 ½.