AgriVisor Corn Advice

Monday, July 11, 2016
Fundamental Analysis: Corn found strength during the overnight trade but slipped into the morning break.  Buyers were initially encouraged by Sunday’s run of the government’s weather maps, which had the last half of July leaning hot and dry.  While the first half of the growing season has gone well for the bulk of the Corn Belt, there will be some worry that heat will persist through the post-pollination reproductive stages.  The weather debate will carry on after being briefly interrupted during the early part of this week by a crop report.  USDA analysts will have to fit in higher stocks and acreage numbers that come from the June 30th reports and will thus be expected to raise both old- and new-crop carryout figures. The average guess has 2015/16 ending stocks rising 100 million bushels to return near the May estimate of 1.8 billion bushels.  New-crop carryout could jump 200 million bushels.    

Tech Comment: December corn futures reversed lower after an early move up that closed the down-gap opened on July 5th.  The early strength faced additional resistance from the 10-day moving average.  An only bright spot to the trade was the December holding up above Friday’s $3.49 low.  Eventually, we’d expect Dec. to turn down again, grinding slowly lower into the 20-week low slated for early September.  It could drop close to the low established on the nearby chart this week at $3.33, maybe slightly lower. The performance over the next few weeks should offer better insight into that.

Basis Trends: Gulf +65 – stdy, Eastern Corn Belt – dn 3/up 4, Western Corn Belt – stdy/up 5.

Basic Recommendation: The break may have come to an end for now; downside risk should be dried up for now.  We wouldn’t recommend sales at this time, but would resume them on the next rebound, but it may only be 15-20 cents higher from here. We might even add a small new-crop sale on strength over the next few weeks.  It will take some time to rebuild the base for another move up, with the next major rally possibly not coming until after the 20-week low in Sept.