Weather and fund interest to drive corn futures
The two dominate forces for corn futures direction is weather and funds interest in tangible commodities such as the grains, energies and precious metals.
Based on Friday afternoon research from our weather advisor, World Weather Inc, the two week moisture change forecast looks to be nearly ideal for the majority of the Midwest, relief forecasted for the southeast and for the last week of the month potential net drying for the northwest Corn Belt states of North and South Dakota. If the trade is looking for a weather event to drive futures back to retest recent highs, they may need to turn their attention to China's cornbelt. The key northeast has found recent relief but it is the secondary region in east central China which is experiencing some extremes with lack of moisture.
Corn Technicals: Allendale Advanced Chart's Dec corn futures chart plainly shows how the long-term trend continues to hold support and is extremely oversold. Funds were primarily responsible for taking futures well above overbought status and it could likely be the same group responsible for taking the extreme downward. If the long-term trend is broken, the next stop is likely the 2500 level which is an area of concentration. Overhead resistance according to AAC is 2640. Two weeks ago, Friday's July futures close 2594, last Friday's futures close 2354 or 10% weaker. Our short-term Moving Average indicators are 2410-2440 and 2490. Two weeks ago, Friday's Dec futures close 2850, last Friday's futures close 2612 or 8% weaker. Our short-term Moving Average indicators are 2660-2690 and 2740.
The Bright Spot: as futures and cash continues to weaken, end users are expected to draw upon supplies more heavily and keep futures from free falling. This was most evident with Thursday's export sales. Take note of our Export Demand page. Combined old and new crop sales were a solid 46% higher than pre release trade estimates. The sales pace thus far suggest, if we can maintain a similar pace for the remaining ten weeks of the marketing year, the target could be 100 million bu more than USDA's present target of 2.075 bil bu. However we do have one roadblock which historical records suggest within the next 4 weeks export activity for old crop drops noticeably as foreign buyers become much more interested in new crop supply. Our research on the pace of shipments suggest we may fall short of the 2.075 bil bu target by 34 mil bu.
Corn Fundamentals: bullish fundamentals include strong export and domestic demand. China is developing more of a dry weather bias in the east central region (responsible for 30.6% of yearly corn output) and they remain out of the export competitive picture. Long term the most bullish fundamental include the tighter than 2003 global end stocks to use for corn and wheat. Bearish fundamentals include rains passing through the major Midwest on a frequent basis and the most recent 6-10 day forecast suggesting above normal temps and normal to above normal precip for the Corn Belt. One other bearish fact is the huge amount of long futures and options positions which funds presently hold. Funds did drop more than 21,000 futures contracts Thursday and an additional 5,000 Friday.