Corn Commentary
May corn closed 2 ¼ cents higher ($3.95 ½), July 2½ cents higher ($4.03 ¼) and Dec 3 cents higher ($4.19 ½)
June Chgo Ethanol closed 0.003 cents a gallon lower ($1.476), July 0.001 cents lower ($1.481)
Flat price corn gets back about half of what it lost on Monday. There are some short term weather worries as selected areas (Minnesota in particular, 4th largest corn producing state) that lagged in Monday’s planting report could remain on the defensive as to its timely corn planting. Adding to the rally were ideas that Monday’s break created a “short term” oversold state. On Thursday the USDA will update old crop corn supply-demand as well give us their first look at the new crop corn supply demand. Traders expect to see slight reductions in the old crop projected carryout due to increases in export. The new crop projected carryout is expected to be noticeably lower due to a smaller crop size and increases in both domestic usage and export. Based on traders’ expectations the swing between old crop carryout and new crop carryout is close to 550 million bu. The projected new crop carryout guess leaves little room for a poor growing season. Better export demand ideas for both old crop and new crop stem from the poor corn growing season in both Brazil and Argentina.
The interior corn basis runs mostly unchanged from Monday. The Gulf reads a touch better. Corn spreads were soft once again despite the flat price increase. I have to think the trades’ focus is moving to the new crop. Based on traders’ expectations for the upcoming supply-demand it’s the new crop that is going to show the best bullish potential.
Okay; the short term oversold that was created with the recent correction has been alleviated. Daily technical data, however, suggests we could see additional correction over the near term. I’m not sure we’ll see much further correction ahead of the USDA given the amount of spec longs still in the market place. Yes, we have seen some fund selling in recent days but overall we’re still looking at a big number for so early in the season. The bottomline – the spec trade wants to be bullish and I’m thinking they will stay with that stance into the USDA report.
Daily Support & Resistance for 05/09
July Corn: $4.00 – $4.07
Dec Corn: $4.16 – $4.22
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