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Bearish demand tone but threatening weather; buyers active

The weather forecast is still hot and dry, but demand concerns persist. December corn closed sharply lower Tuesday, as a bearish tilt from the USDA monthly supply/demand report and weakness in energy and stock markets helped to keep the demand tone poor. A strong U.S. dollar plus talk that Brazil may start exporting corn to China before the end of the year helped drive the market lower. 

In the USDA report, U.S. corn ending stocks for 2022/23 came in at 1.470 billion bushels above the average expectation of 1.437 billion and up from 1.400 billion estimated in June. Ending stocks for 2021/22 came in at 1.510 billion bushels versus 1.489 billion expected and 1.485 billion in June. There were no changes for new crop demand numbers, which left total usage at 14.570 billion bushels versus 14.865 billion for 2021/22. 

World ending stocks for 2022/23 came in at 312.94 million tonnes versus an average expectation of 310.50 million and 310.45 million in June. 

Brazil's 2021/22 production was left unchanged at 116.00 million tonnes versus 116.30 million expected, and Argentina's production was left unchanged at 53.00 million tonnes versus 52.30 million expected (range 49.00 to 53.00 million). 

U.S. old crop ending stocks came in more than 20 million bushels above trade expectations, as the demand numbers were not as strong as expected. This helped push new crop stocks higher. World stocks came in higher than expected because global usage was revised down by nearly 1 million tonnes. The USDA news was disappointing, and this triggered an aggressive selloff in soybeans and corn. 

The two-week forecast for much of the Midwest calls for hot and dry weather. If the dryness persists into early August, some areas may develop crop stress. If we see a 2% drop in yield from the USDA forecast, ending stocks would slide to 1.178 billion bushels and result in a stocks/usage ratio of 8.1%. Both these readings would be the lowest since the 2012/13 season. European crops are already under stress.


Unless the weather forecast shifts, the market is likely to find some support soon. The technical action is bearish, with close-in resistance for December corn at 601 1/2 and 612 1/2. Next support is at 566 1/2 and 531 1/2. We lean toward the bull camp short-term. 

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About the Author: Terry Roggensack, a founding principal of The Hightower Report, analyzes the livestock, grain and soft markets. Roggensack has over 30 years of experience in the commodity and financial futures industry. In the late 1980s, he briefly lived in London as acting director of a new London clearing firm. Prior to that, Roggensack was director of research at Stotler & Company.

Editor’s Note: This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. Any information or recommendation contained herein: (i) is not based on, or tailored to, the commodity interest or cash market positions or other circumstances or characterizations of particular investors or traders; (ii) is not customized or personalized for any such investor or trader; and (iii) does not take into consideration, among other things, risk tolerance, net worth, or available risk capital. Any use or reliance upon the information or recommendations is at the sole discretion and election of the subscriber. The risk of loss in trading futures contracts or commodity options can be substantial, and traders should carefully consider the inherent risks of such trading in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of The Hightower Report is strictly prohibited.

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