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Commentary
Corn continues to probe for support in the market. Contract lows were set 2 weeks ago, and yesterday’s lows were within less than 2 cents of them. Being that Iowa is the top corn state in the US and now running in excess of 200% of normal precipitation in 50% of the state., moisture is aplenty in the large growing areas of the Midwest. The National Weather Service reports the Midwest will finally cool down to end the week, with daily high temperatures in the 70s over much of the region. However, Iowa and Illinois will see stronger to severe storms today, after Iowa was hit with heavy rain and storms overnight. Potentially damaging winds may accompany the heavy rain that is expected. Amounts of 1-3 inches are likely in Iowa, with smaller pockets of 3-5 inches or more possible, producing flash flood watches. The latest round of China trade talks yielded no major breakthroughs, and key trade agreements with Canada, Mexico, South Korea, and India remain unsigned. Adding to pressure, a well-known crop scout firm released a corn yield estimate of 185.7 BPA-well above USDA’s 181. A 185.0 BPA yield would imply an additional 350 million bushels of ending stocks. In Ukraine, locust infestations are affecting southern regions after Russia’s destruction of a dam created ideal swampy breeding grounds. Ukraine’s Ag union projects a 2 million ton drop in corn output due to poor weather and insect damage. Corn exports from Ukraine since July 1 are down 59% year-over-year. Corn open interest surged over 28,000 contracts on Tuesday on the market’s decline, suggesting new short positions are being added. Technically this market has initial support at today’s settle at 412 for December corn. That level represents 10 percent down for year. Near term lows at 407.4 will be targeted if 412 can’t hold on closes. The next level of key support is 4.03. If that doesn’t hold its 390, which represents 15% down for year. Resistance is 423 and 430. Closes over these levels could push to major resistance at 442 which is the July 3rd high.
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Sean Lusk
Vice President Commercial Hedging Division
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