December corn is trading 15 cents higher near 7:30 CST. After
trading near limit down levels yesterday, corn managed to close
well off its lows and post a positive move overnight. Technical
charts look weak, but the fundamental picture is largely
unchanged. This likely brought in speculative buyers overnight.
No deliveries have been made in July corn. Total corn open
interest was up 17,068 on the lower move yesterday providing
ammunition to the bear camp this morning. Dalian November corn is
trading down.25%. The corn market made an attempt to pick up the
pieces and repair some of the chart damage overnight, however it
remains to be seen who exactly holds the upper hand today. The
bears point to terrible technical chart damage from yesterday
which should force some of the bulls to the sideline. The daily
range, violent swings, very large trade volume, and the huge
increase in open interest all point to short term top. Rumors
were running wild yesterday with thoughts that the EPA would
adjust the ethanol mandate lower, this made some investors
nervous and they moved to the exits. The USDA made an aggressive
decision in cutting the yield to 146 bushels/acre and the market
may have been caught off guard. The trade has been pricing in a
sub 150 yield for a weeks now, so the fact that the USDA
confirmed this, likely caused some steady liquidation in the
market, which was accelerated as sell stops were triggered.
Despite all of this, the problems we've had since early June are
still prevalent today. The weather patterns this last week have
been far from perfect for the important corn growing regions at
this point in time. While rains have been beneficial to soybeans
in the delta and southeast the past 3 days, it will provide no
help to the corn crop. The area of real concern now lies in the
western Corn Belt for states like Iowa and Nebraska. Temperatures
have cooled this week providing relief to corn, however rain has
been absent. There is a better chance for showers for parts of
the Midwest, east of the Mississippi this weekend and the 6-10
day maps added rain to forecast yesterday but confidence in this
6-10 day forecast remains low, as does the rain over the weekend.
The July 8th crop condition report showed 77% of the Illinois and
60% of Indiana were silking, so rain over the weekend will likely
not boost production too much for those states. In contrast, Iowa
corn silking is 48% and Nebraska is 50%. The 80-90 degree
temperatures and lack of rain this past week could add 15-20% to
those numbers meaning that if the 6-10 day rainfall developed,
only a quarter to a third of the corn in this area would benefit.
Further downward revisions to crop conditions for these states
and yield stress is likely by next Monday. In the end, nothing
has drastically has changed in the corn market and high
temperatures in the western Corn Belt for next week could
significantly clip Iowa/Nebraska yields. The possibility of
better weather remains, but the trade has waited for that since
early June and the likelihood that the crop is getting smaller
increases with every passing day. The USDA slashed corn demand
across the board by taking out 1.05 billion bushels in ethanol,
feed demand, and exports. Weekly ethanol production hit the
lowest level since September of 2010 and the export market has
slowed. However, by just taking the current yield of 146
bushels/acre down to 140 would cut supply by 600 million bushels
and drop the stocks/usage from 9.4% to 5.2%, the second lowest
since 1950/51. While demand will continue to be stagnant over the
next couple of weeks, or months, it is hard to call a top in the
market if weather remains warm and dry to finish out the month of
July.