It's raining in July. One has to think the corn crop is not getting worse. In fact, overall, improvement in crop conditions reported this week proves that the crop has stabilized. The only concern that many are having is the potential of disease associated with hot and wet conditions. Many producers are now spraying fungicides to prevent yield loss.
So the question continues to be, How big will the yield be? Some in the trade are still above 166 bu./acre corn yield, while I would suggest yields closer to last year, around the 162 to 164 bu./acre level. The impact on prices should not be a straight line getting bigger with every bushel drop. Right now, a move from 166 to 165 bu./acre will have limited impact -- say, 10 to 15 cents -- while a drop from 161 to 160 bu./acre will have more than a 25- to 35-cent inpact.
The problem is, now that the corn fields are hiding all the wet spots, it’s difficult to get a handle on how good the yield is actually developing. I would suggest the corn bulls will have to take a break right now. It will not be until after the August report, and more likely the September report and early yields start coming in, that we will have a solid handle on productivity.
Right now, I feel comfortable suggesting that in the next couple of months it will be difficult for the December futures to get below the June low $3.4325; a close above the February high of $4.142 should be equally challenging. To my way of thinking, this is a range-bound market in which selling against overhead resistance and buying against support is the way to position oneself in the market.
As for old-crop inventory unpriced, I still have to believe the risk is in the cash, with the basis exposure. If you have to move corn between now and September, I can’t recommend going much longer. Get it priced and look to reown on a fall low.
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