Corn bulls are happy to see both old-crop and new-crop prices hold technical support just above our previous harvest lows. In fact some tech guru's are starting to talk about a possible double-bottom now forming on the charts and corn prices moving back to higher ground. I understand their logic, but I'm not 100% onboard, especially when you start to consider the overall trade environment.
I'm currently seeing more U.S. weather forecasters calling for moderate to mild summer conditions. The U.S. dollar remains stronger than it has been in over a decade. Chinese demand for U.S. corn remains a "non-event." U.S. farmers are still sitting on an abnormally large supply of old-crop supply. Bird-flu continues to create head winds and uncertainty in regard to U.S. corn used for feed. And global corn supplies appear more than ample.
Inside the market, traders are clearly starting to talk about the potential for the USDA to raise their new-crop yield estimate slightly higher, simply based on the pace of planting and the recharging of soil moisture. I know this is a direct contradiction to what many producers are telling us they are seeing out in the field, but as producers, we have to listen and acknowledge what the market is trying to say and how it's digesting the data.
Right now the trade believes the pace of planting and the wide spread moisture is very beneficial to the crop longer-term. In the simplest of thoughts, as long as the trade believes there's a chance the U.S. could harvest another 14.0 billion bushel crop, the bulls are going to have a very difficult time mounting a major rally...especially when you take into account the head winds we are experiencing in the outside macro markets. Remember, when corn pushed to $8.00 a bushel, all the stars were aligned and the entire investment landscape was primed, which allowed the slightest spark to start a massive bullish forest fire! Corn used for ethanol was fueling the demand side of the equation. There was fear the Chinese were going to step in and become large buyers of corn when the world had very little to offer. The U.S. dollar was trading near multi-decade lows. The entire commodity sector was booming. And U.S. corn production was struggling as farmers were being hit by multi-year droughts.
Sorry, that's just NOT the same environment we are looking at today. The stars have moved and the planets have shifted. A bit of bullish news perhaps is included in the graphic below. As you can see, "final" corn acres the past couple of years have ended lower than than what the USDA has projected in both March and June. As producers who are pulling for higher prices, we have to hope that trend continues.