Commentary
The upcoming WASDE on Friday will be a reminder from the USDA of how big a yield the USDA is working with on the balance sheet. A 181/182 BPA yield is a monster amid a production number of 15.2-billion-bushel crop. Given that its June, the trade expects few changes from the govt and it’s a rarity to change the production side of the new crop this early. What would knock them USDA estimates from their perch this year. Only 6 times in history did the USDA change the June yield. Two years were for drought, two for delayed plantings, and 2 for regional flooding. I included a chart of Dec 23/Dec 24 corn. Interesting that we traded to approximately 50 percent retracement from the last months low at 1.4 cents Dec 23 over from over 63.4, last Falls high. If we have agreeable weather through July in most growing areas, we could see this spread move to a carry from the very recent 31 cent inversion high. Since early March, selling this spread above between 30 to 35 cents Dec 23 over has been given the seller the opportunity to cover it cheaper, which is the name of the game. No trade recs yet as weather forecasts are mixed, but over time should weather cooperate, I Look for this spread to move to 40 to 50 cents Dec 23 under in my opinion. Approximately 70 to 80 cents from current levels. This assumes good weather and weak demand. Big unknowns currently, but weather will verify this early planted crop in July. It is something we think worth watching as an opportunity.
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