What happened

After trading up to $5.72 in late July, December 2023 corn futures have come crashing down. Right now, prices are testing the very important $5.00 price support level, losing 70 cents in just seven business days.

Improving weather conditions, continued signs of weak export demand, fund selling and a rally in the U.S. dollar are all factors weighing on corn prices for the short term.

Marketing perspective

Many producers had the opportunity to sell new crop corn at higher prices this summer, as the market provided two rally opportunities due to hot and dry weather concerns. But now the calendar has flipped to August, and the weather outlook has improved.

Seasonally, December corn futures also have a tendency to trade lower throughout the month of August barring any unexpected bullish news.

The next question becomes yield. Right now, the USDA has corn yield pegged at 177.5 bushels per acre. The industry currently feels that number is likely too high due to the high temperatures in June and July. However, it is too soon to accurately predict where final corn yield may end up being, especially if August weather is conducive to filling kernels.

Right now, the industry chatter regarding expectation for yield is coming in between 172 and 175 bpa.

If yield comes in near 175 bpa, then ending stocks are still over 2 billion bushels, which is not a reason to have higher priced corn values.

If yield comes in near 172 bpa nationwide, then using current USDA demand numbers, ending stocks would come in at 1.785 billion bushels, which is still higher than last year’s ending stock number of 1.4 billion bushels.

The bottom line is that it would take a yield number of less than 170 bpa to give the market a fundamental supply-side reason to rally.

Prepare yourself

Looking ahead to next week’s USDA WASDE report, traders will be eager to see if the USDA will show any fresh signs of life for demand or a potentially lower yield number.

Keep in mind that for the August report, the USDA assembles information for yield via farmer reported yield surveys and some satellite-based yield models. There are no “boots on the ground” gathering objective field evidence (that will not occur until the September report).

At this point, the reality is that many factors are pointing to sideways to lower prices for new crop corn futures for the short term.

December 2023 corn futures have first support at $5.00, with $4.90 next support. Should prices fall below $4.90, the downside technical target points to $4.50.

It would take a surprise reduction in yield, a dramatic escalation in the Russia/Ukraine war, or an untimely Derecho storm to turn this market higher.

Reach Naomi Blohm at 800-334-9779, on Twitter: @naomiblohm, and at [email protected].

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