Afternoon Corn: U/Z rebounds after pressing to a new low Wed-Thurs

Afternoon Corn:  U/Z rebounds after pressing to a new low Wed-Thurs

The corn market ended a somewhat uneven week with modest gains. Sept Corn was the star Friday, finishing 8 cents higher, while other positions ended the day around 4 cents higher. For the week, corn ended six cents lower. Cash markets were generally lower for the week, though the Gulf did manage to bounce back a little up-front.

CFTC Commitment of Traders data after the close found a small amount of fund buying in the corn market. For the week ended 8/2, large non-commercial traders were net buyers of 9,156 corn contracts, which was nearly all new longs in the market. Small (non-reportable) traders and commercials were the sellers, while index (or long-only) traders were also net buyers. When including recent activity, we think funds are heading into the weekend net long nearly 50,000 delta-adjusted corn.

One week from Friday, the USDA will release its next monthly crop report update. The feature of the August WASDE is expected to be a potential yield adjustment, and everyone has an opinion as to what they will come up with. The bear camp is pushing for something in the high 170's, while the bull is looking for the low 170's? There will likely be some showers around this weekend centered mostly in the upper Midwest, and the ECB might see some follow-through rains next week. The odd man out remains portions of the Western Belt, where crop stress is expected to kick up a notch.

Elsewhere, end-user markets were mixed on the week; livestock held up well, while dairy lost ground, and ethanol margins took an absolute shellacking. Though crush had a small respite Friday, we think an average Midwest ethanol plant went from 10-15 c/gal profitable last week to small losses by the end of this week. European crops remain challenged; France revised its corn crop down to 12.4 mmt (18.6% lower yr/yr), and the crop was recently rated 58% Good-Excellent vs. 63% last week (and 80 percentile last month). Geopolitical tensions remain; so far, it does not appear like Chinese dissatisfaction over U.S.-Taiwan has extended into the ag realm. Grain vessels appear to be trickling out of Ukraine, but we continue to feel this will be a drawn-out and fretful process ahead.

In the options, volatility continued to leak lower. Calendar spreads were mixed; weaker in the new crop, but U/Z featured a nice rebound today after trading to new lows mid-week. Corn was the winner of the grain room today, gaining on both soy and wheat. The chart set-up is somewhat interesting here, with the market trading into the late July gap higher, not quite filling it, and then bouncing back. The objective of the bear is to close that gap (bottom end is $5.84 CZ); until closed, it functions as support and a rallying point for the bull. A renewed rally would have the bull take aim at the next layer of resistance in the $6.50-6.60 area, but first we have to deal with the $6.20-6.25 area again on a rebound. Momentum indicators are indecisive, and we are neither especially overbought or oversold (RSI in the 50's).