Grain Spreads: Corn Counting

Sean LuskGeneral Commentary

Commentary

Corn led the market higher after a bullish Pro Farmer corn yield estimate last week in my opinion. PF puts the US corn crop at 168.1 bushels per acre and the trade was looking for 171-173.  The USDA is at 175.9.  Corn futures rose to the highest prices in over two months as Pro Farmer’s U.S. crop estimates underscored expectations that production prospects suffered from extreme Midwest heat and dryness. If all the other inputs on Corn’s balance sheet remain the same and if a 168.1 is verified, ending stocks could fall 600 million bushels to 791 million bushels, and stocks to usage could fall to 5.4 percent. That would come close to the all-time low of 5 percent stocks to usage back in the 95/96 crop season. With all this being said, it’s the USDA’s purview on how they see production and yield that trend and index following funds follow. It’s my belief that USDA will not cut yield 7 bushels per acre in the September WASDE report. I see them making a more modest adjustment in the next report leaving any major revisions to come in November or January. I will be out with trading recommendations later in the week. Technically, December Corn could rally to the 50 percent retracement from the Spring high at 8.24, to the July low at 5.61. That level is 6.93. A close over and its 7.12, which is 20 percent higher for the year. Over this level, corn can challenge 7.46. Support is just underneath todays close at 6.82. Major support this week is at 6.58. A close under and its 6.52 then 6.23 in my opinion. 

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Sean Lusk

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