Afternoon Corn: CFTC report delayed; bull spreads help corn to decent weekly gain

The corn market closed out the week in quiet fashion, adding 1-2 cents to a decent week of gains. The weekly chart will reflect a gain of ten cents, but the May contract was a major beneficiary of bull spreading and ended the week 17 cents better. By contrast, new crop Dec gained only three cents. As we went to the press, the CFTC had not yet published their weekly report; funds were estimated small net buyers today and are believed net short just over 20,000 delta-adjusted corn. Cash trade was steady to close-out a steady/firm week.

The grain headline of the day was arguably another (smaller) 8 AM corn sale to China of 191,000 metric tons. The latest sale would take their four day buying spree to just over 2 million metric tons (83 million bushels). The sudden improvement in export sales trajectory has been a major catalyst in reviving the bull spreads in corn after a two month pause/retreat. Whether this is a 'one-off' in exports or a short-term change in trend may determine if there is follow-through to this week's positive trade in both flat price and spreads.

Outside markets featured a typical Friday 'risk-off'. Equities retreated, Crude Oil sank to a new 15 month low, and 'fear gauge' gold soared. One outlier this week was the US Dollar, which finished lower for both the day and week; weakness here is likely tied to the European Central Bank's surprise 50 point rate hike earlier this week. Next week could be a busy one; the U.S. Fed will opine on rates, banks will remain in the spotlight, and Chinese President Xi will visit Russian President Putin Mon-Wed. Russia continues to insist the latest Black Sea grain export deal (which expires this weekend) is good for only 60 days, while other participants are pushing for another 120 day extension? This geopolitical uncertainly likely helped wheat gain some ground Friday?

Elsewhere, end-user markets had a mixed week; livestock sold-off, while both dairy and ethanol rallied smartly. We think an average Midwest ethanol plant is earning 15 c/gal profits, including all costs. Cattle on Feed report after-hours was near analyst expectations; 'on feed' inventory was 96% of year ago, Placements were 93%, and Marketings 95%. More analysts are trimming Argentina corn estimates to the mid 30 mmt area, safrinha corn planting in Brazil is wrapping-up, while very early planting in the U.S. Deep South has begun.

In the options, volatility was slightly firmer heading into the weekend. Calendar spreads were steady/easier today after a very good week for the bull spreader. Corn gained on the beans but lost to the wheat today. On the charts, last Friday's low of $6.06 remains the first line of support. Initial CK resistance at $6.30 fell by the wayside; the next problem spot is in the $6.40-45 zone. May Corn is no longer oversold (49 RSI) and momentum indicators have now turned up. CZ initial resistance remains around $5.65. Initial support is last week's low of $5.51, below which we have the July lows just above $5.40. CZ is no longer particularly oversold with the RSI sitting at 38.