There hasn’t been much for either the bulls or bears to get excited with Corn in the last couple weeks. Maybe for good reason as the crop is planted and emergence per the USDA is near 95 percent. Corn has found some support from a sixth straight weekly rebound in ethanol production and drop in inventories. Trend and Index following funds have also amassed a short totaling near 300K contracts in the last few months, so I wouldnt rule out a weather driven rally that pushes Corn 50 to 60 cents higher on short covering provided that dry and hot weather develop into and through key yield development time in July. Better demand numbers have been seen also as Brazil still needs to harvest their secondary corn crop while their production numbers drop fro prior estimates. However the demand has not been enough to offset what is seen as a potential 3.3 to 3.5 billion bushel ending stocks figure come harvest in November. It is a massive carryout figure and if achieved we could see Corn trade with a 2 handle infront of it. Given planting and emergence dates the trade in my estimation should have a real good idea of what this crop is or isnt by the end of July. Thats when key pollination dates (7/15 through 7/30) in the heart of the corn belt will take place in my opinion. For now funds have a sizable bet that neither a weather premium, Chinese demand, or corn bushels into ethanol returning to Pre-Covid levels will lead to a corn rally. Im not saying that these things can’t happen, but in my view for now it doesn’t seem funds are betting on any of the three developing. That said, they are sitting on a 300K contract short. That is massive but not a record short. In my view watch the Dec 20/21 corn spread for clues. A close over 28 cents Dec 20 under could precipitate a short covering rally in Corn heading into the Quarterly stocks report at month end and into the key pollination month of July. A hard close under the upward trendline at 32 cents Dec 20 under and outright corn could start another major leg lower. In my esitmation, funds love pushing the market to round number percentage levels for the calendar year. Twenty percent down for the year corn comes in at 311.4. Twenty five percent at 2.93 and thirty percent at 274. A near term rally could push December to 351 which is ten percent down while 3.69 would be down five percent for 2020. No specific trade recs here but in my view I would keep an eye on the Dec20/21 spread below for clues for direction in my opinion.
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