Can Corn Bears Stand The Heat??
Today’s Spotlight Market
Last Friday we received the latest USDA projections in its release of the Crop Production and Supply/Demand report for July. For Corn, we saw the USDA lower its production estimate for new-crop Corn to 13.53 billion bushels. This was 100 million bushels lower than the June estimate on a reduction of expected harvested acres. The USDA did leave its average yield forecast? unchanged at 166.8 bushels per acre, although many traders expect this figure to be lowered in upcoming reports due to the decline in crop conditions in the eastern parts of the Corn Belt. On the demand side, the USDA lowered its 2015-16 projection for feed usage and U.S. exports by a combined 50 million bushels, but did raise its estimate for Corn usage for Ethanol production by 25 million bushels. The next USDA Crop Production and Supply/Demand report is scheduled to be released on Wednesday, August 12th at 11am CDT.
Fundamentals
Long-term traders who have been bearish on Corn futures the past several months have taken some heat, as prices have rallied over 80 cents per bushel during the past 4 weeks on concerns that this season?s crop will not live up to the lofty expectations forecast earlier this year. This season has been a case of too much rain that has traders concerned, as well above normal precipitation that has plagued many parts of the central and eastern Corn Belt. Now that we have reached the middle of July, there are some concerns that the spell of hot weather expected to cover most of the Midwest for the next several days could affect the critical pollination period.
While in most years a period of hot, dry weather during pollination would be a concern for potential yields, given the rather cool and wet growing weather we have seen for the most part this year, a period of warmer and dry weather may actually be a good thing to help dry out some of the rain soaked fields seen in the central portions of Illinois and Indiana. This could be especially true if the hot spell does not persist for an extended period of time.
That certainly appears to be the case, at least according to the Climate Prediction Center (CPC) which has released its temperature and precipitation outlook for August through October. The CPC is calling for an increased probability of below normal temperatures for the heart of the Corn Belt. On the downside is an increased chance for above normal precipitation for most of the same area, with some private forecasters calling for average Corn Yields to fall below 160 bushels per acre if we don?t see some more seasonal weather in the coming weeks. A little actual ?summer? weather may be exactly what is needed to help this season?s crop meet the current USDA forecast of an average yield of 166.8 bushels per acre.?????? ?
Technical Notes – View Today’s Chart
Looking at the daily chart for December Corn, we notice prices becoming quite volatile of late after the nearly ?parabolic? up-move seen at the end of June. Prices are now clearly trading above both the 20- and 200-day moving averages, but the 14-day RSI has retraced a bit from vastly overbought levels to its current reading of 70.39. Trading volume has increased sharply the past 4 weeks, as traders are now focusing their attention on the new-crop futures. Tuesday?s high of 454.25 looks to be the next chart resistance level, with support found at the July 7th low of 424.50.
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