Afternoon Corn: Corn won the WASDE on tighter 22/23 world carryout

Afternoon Corn:  Corn won the WASDE on tighter 22/23 world carryout

The August WASDE is now in the books, and corn futures ended the day better than it started. The initial reaction was somewhat uneven, with Dec Corn trading over a dime lower in the immediate aftermath, but the market quickly recovered and featured a slow grind higher over the balance of the session. Corn finished Friday 10-14 cents higher Sept '21 through July '22. For the week, futures gained almost 30 cents, posting its highest close in about six weeks. Cash trade was steady in some places, weaker in others, continuing the week's softer vibe.

The USDA delivered mostly friendly feature in their August WASDE update, though it perhaps lacked the fireworks envisaged by some uber-bulls. They trimmed both yields and acreage; the former by -1.6 bpa from July to 175.4, the latter by just -0.1 mil acres to 81.8 harvested. Thus, production moved 146 million bushels lower from July estimates to 14.359 billion bushels. The USDA trimmed 25 million bushels each off feed/residual and exports for 22/23 and raised 21/22 carryout by 20 million bushels to 1.530 billion bushels. The USDA now projects 22/23 domestic carryout at 1.388 billion bushels vs. 1.470 billion in July. Both production and carryout were near trade expectations. World data was perhaps more interesting; they reduced the EU's corn crop by 8 million metric tons (mmt) to 60 mmt. They also raised Ukraine's export figure by 3.5 mmt to 12.5 mmt, on a 5 mmt increase in total corn production. World 22/23 ending stocks projections fell to 306.7 mmt vs. 312.9 in July (and an upwardly revised 311.8 in the current marketing year of 21/22).

CFTC Supplemental Commitment of Traders data after the close confirmed funds were decent net buyers in the corn market through at least Tuesday (8/9). Large non-commercial traders were net buyers of 19,425 corn contracts, the majority of which (14,303) was new length. Commercial firms and index (or long-only) traders were the offsetting sellers, while small (non-reportable) traders were net buyers. When including recent activity, we think funds are heading into the weekend net long roughly 75,000 delta-adjusted corn.

Elsewhere, end-user markets all closed this week higher. Ethanol was among the major beneficiaries of this week's buying, taking spot margins from small losses at the end of last week to small profits at the end of this week. As we went to press, the USDA had not yet released its first FSA acreage 'data dump'. If there are surprises, it could have a bearing on Sunday night trade? Weather remains dryer (but cooler) in the short-term. The 8-14 day map going home tonight did forecast an upswing in precip for eastern and southern U.S. growing areas? Outside markets helped grain sentiment too this week, with the stock market ripping, the US Dollar continuing to ease back a little, and energy fighting off an early week test of support. There was chatter today that Chinese President Xi may make his first foreign trip in three years, potentially meeting U.S. President Biden at a SE Asian summit in November?

In the options, volatility set back post-report, particularly in the Sept which expires in two weeks. Dec $7.50-8.50 Call Spreads were the popular trade of the day, trading at 5 cents-and-change. Calendar spreads were mixed; U/Z continues to break, now trading at small carries, while other positions were generally firmer. Corn was the WASDE winner, gaining on both beans and wheat. The chart set-up remains interesting, particularly as last week's gap (bottom-end $5.84 CZ) remains open. Until closed, it functions as support and a rallying point for the bull. Corn has cleared initial resistance in the $6.25 CZ neighborhood; the next point of note is the July high of $6.58, which looks like a more difficult area. Momentum indicators are still quite positive, but corn is starting to get overbought (RSI nearly 70).

KJ