Weather To Cap Corn Rallies
Corn had a general evening up tone to end the week. Good crop and weather conditions could keep a lid on any potential rally. The Midwest will see favorable conditions for crop development over the next two weeks. Weather models on Friday showed the development of a high pressure ridge June 17 to 21 over the central and eastern US. This may have gotten the market excited late in the day. However, unless it is a fairly prolonged event, there should be adequate soil moisture to maintain the crops. We'll have to wait until the USDA's Stocks and Planted Acreage Report on June 30th to find out how many acres were switched to soybeans in North Dakota, Minnesota, Wisconsin and Michigan. Until then, the market will be torn between talk of lower acres and good weather. As of June 1, 95% of the corn crop had been planted and 80% had emerged. This year's first condition rating puts 76% of the crop in the good to excellent category. This is well the 63% good to excellent rating during the same week last year and seems overly optimistic.
Technically, December corn futures put in a reversal higher after dropping to within a dime of the contract low. A bounce back to 480-490 on the December futures is a target on a correction. The US dollar had been strengthening since early May and keeping pressure on commodities in general but the reversal on the dollar index suggests that could weaken in the week ahead.
Spot ethanol prices have been under pressure lately and were lower most of the week as supplies are at 14-month highs and production was up.
... reversal higher after dropping to within a dime of the contract low.
Soybean futures lower but held short term technical support.
Soybean futures traded quietly mixed today as prices are testing short term support levels. For old crop, demand has been decent yet for exports and processing, but there are some signals emerging that might change that perception. Some processing plants will begin taking scheduled downtimes for summer repairs, which will slow production.
Overall basis levels seem to be steady but some are weakening as basis at the Gulf is getting wider as demand continues to slow for export. With South American soybeans trading at a discount to U.S. beans, export values at the Gulf continue to be under pressure.
Soybeans had been holding their value better than the corn and wheat over the past month and remaining at the early May values. We could be setting up for a period of soybean weakness as the Dec corn/Nov soybean spread corrects. There is some discussion of additional acres of soybeans in ND, MN, WI and MI due to the wet spring. While new crop prices are overvalued if we have a good crop, there will remain a large inverse between old crop and new crop prices. Through May 29, soybeans export sales are at 103% of the USDA forecast. Export demand could increase on Tuesday when the USDA releases its June Supply and Demand Report.