Last month’s blog laid out a list of expectations as we moved into the key marketing timeframe for the year. In hindsight the list looks accurate, but I can’t help but feel disappointed with the way things have played out over the last 30 days. Let’s take a look at where things finished for the week, what drove values and how it will all influence trade moving forward.
On June 10, prompt December Corn settled at 341’4; the July 10 settlement was 344’6. When we consider what the market digested in between, the fact that it all only warranted a three-cent move should be sobering. First, the sharp reduction in corn acres shown in the Planted Acreage Report was enough to definitively bottom corn values at the end of June. We knew new crop production on Friday’s July WASDE report would be significantly reduced for corn simply due to that decrease in planted acres. This was rectified on the balance sheet and 995 million bushels were shaved off production. While a production drop of this magnitude is significant, we must remember that 2.648 billion bushels of corn is not a bullish carryout estimate. Second, market participants have been closely watching weather models which have flip-flopped between hot and dry some days to more moderate temperatures and adequate precipitation other days. The forecast was in the category of the latter as we finished the week which added to pressure into Friday’s close. Lastly, trade with China had some positive news with an announced sale of 1,365,000 MT of corn. That is until Bloomberg reported later in the day that President Trump was quoted saying, “The relationship with China has been severely damaged” and a phase two trade deal with China isn’t under consideration.
Technically December Corn has what appears to be a weekly double top with this week’s high of 362’0 unable to break through last week’s high of 363’0. In between making those two weekly highs, December Corn made a low mid-week at 347’4. Friday’s close below 347’4 to finish the week is a negative development technically and would suggest a major high has been made in the corn market. A move above 363’0 is now needed to change that sentiment and rallies are to be sold.
Soybeans could still have a story moving forward and are more likely to find buying from a hot and dry forecast as models next week will start to look at early August weather. Even though USDA increased their estimate of new crop soybeans to 425 million bushels, the increase is not material enough to offset a yield reduction from trend should weather models start that conversation. A late summer rally in soybeans might just be the thing that gives us another shot at recent highs for corn, but without help from weather moving forward the onus will be on demand to bring rallies at a time when concerns about a second surge of COVID and trade tensions reemerge.
Everything can turn around again with the right forecast on a Sunday night, but developments this week need to be taken at face value. The calendar is a week past July 4th, there is a double top on the chart, corn made new lows for the month and closed near the low on a WASDE report day.