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Chicago Board of Trade Market News

Outlook: December corn futures are 13 ½ cents (2.5 percent) higher after another week of choppy trade. U.S. weather forecasts are shifting more favorably for corn and soybean production, which sparked an early selloff on Monday and has capped rallies since. End-users and commercials remain active buyers on market dips, however, and steady/strong basis levels are keeping the market chopping sideways rather than breaking lower.

Much of this week’s market action is due to the latest U.S. weather forecasts, which show meaningful rains for the western U.S., central Plains, and much of the Corn Belt. Temperatures will moderate heading into and through this weekend, though heat will return to the northern Plains/western Corn Belt mid-next week. The 8-14-day forecast shows above average temperatures moving across nearly all the Plains, Upper Midwest, and Corn Belt states, which may disrupt kernel fill of corn crops in the region. Overall, however, the forecast is more concerning for the soybean crop as most of the corn crop will have passed through the key reproductive stages when the next heat wave could hit.

U.S. corn condition ratings were slightly lower in this week’s USDA Crop Progress report with 64 percent rated in good/excellent condition, down 1 percent from the prior week. Conditions in the western Corn Belt and Plains states saw the greatest decrease while the eastern Corn Belt remains in exceptionally good condition. USDA said 79 percent of the crop is silking, 6 percent ahead of the normal pace, and 18 percent of the crop was in the dough stage as of 25 July. The improved near-term U.S. weather forecast means plants will likely complete pollination and start kernel fill with only moderate heat, which will help yield potential.

The trade is already looking forward to the August WASDE, which will be the first report where USDA includes data from field samples to help create the corn yield forecast. Expectations are that states in the eastern Corn Belt could post record-large yields with at least one private firm forecasting a 11.304-MT/hectare (180-bushel/acre) U.S.-average yield. Most analysts, however, have yield projections below USDA’s July WASDE figure, with early U.S.-average yield forecasts ranging from 10.8-11.27 MT/ha (172-179.5 bushels/acre).

U.S. old crop corn export sales continue to follow their seasonal pattern lower, but weekly exports were up 36 percent from the prior week at 1.36 MMT. YTD exports are up 63 percent at 62.1 MMT while YTD bookings (exports plus unshipped sales) are up 59 percent at 69.655 MMT. YTD bookings have reached 96 percent of USDA’s 2020/21 corn export forecast while YTD exports are 86 percent of that figure. New crop export sales were up sharply from the prior week and outstanding 2021/22 sales total 16.6 MMT, up 117 percent from this time last year.

From a technical standpoint, December corn futures continue to chop sideways with breaks finding support at progressively higher prices and rallies seeing limited follow-through buying. Support lies at $5.30 in December futures while resistance lies initially at $5.60 and $5.73 above that. Fourteen-day stochastics are swinging higher but remain in neutral territory, as does the relative strength index (RSI) at its current 48.24 value. Funds have been slowly lightening up on long positions on rallies, but liquidation remains limited as few want to forego upside potential given the drought in the northern Plains and western Corn Belt. Commercials remain patient buyers but have been active on breaks amid firm basis levels in the cash market. For now, it seems neither bulls nor bears have the fundamental reasoning or will to push the market either higher or lower.

Source: CBTO

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