Liquidation Intensifies in Corn Market

July 17, 2008 07:00 PM

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

No Bullpen next week. I'll be helping out at our county fair.

How much has crop recovered?... After yesterday's sharp losses, corn futures are back near the top of the pre-flooding trading range. December corn closed below the May high. So this begs the question, "Should the market really be assuming a larger carryover than one or even two months ago?" I'm not convinced demand has slowed to the point where we should assume even a larger new-crop carryover; or that the crop has recovered to the point where we should "assume" a trend or better yield.

I do appreciate the corn crop has posted a solid recovery since the massive flooding -- perhaps even more than I initially expected. But I'm not convinced this crop is "made," as there are still a lot of holes in this crop. Drowned out spots were massive this year and from the air, Iowa looks like abstract quilt of sorts, much unlike the uniform squares and rectangles typically seen as the growing season progresses.

We can usually expect several weather-related scares during a cropping season... and this year is far from over. There will be more weather scares. But in the meantime, corn needs to find a landing spot above uptrending support to avoid even a steeper decline that would deepen technically based selling.

Keep your comments coming. Always good to have conversation with you and input on what you'd like to talk about. E-mail your comments/question to me by clicking here. Please include your location.

Opening calls. These calls originate more than three hours before the open -- use caution, things change:

Corn: 1 to 4 cents lower. Futures were weaker overnight on spillover pressure and a round of showers over the central Corn Belt. Futures closed 26 to 27 cents lower on improved weather forecasts and outside markets. December corn penetrated and posted the first close below the early May high to return to the top of the post-flood trading range.

Soybeans: 6 to 8 cents higher. Futures were firmer overnight on short-covering. Futures closed mostly around 50 cents lower yesterday, with pressure coming from moderating weather forecasts and news the Argentine Senate rejected the soybean export tax. The soybean market had a large Argentine premium priced in. November soybean futures respected support at the previous's low and the June low of $14.83. If futures dip below this level, it could trigger more active sell stops.

Wheat: Mixed. Futures were mixed overnight, favoring a slightly lower tone. Futures closed mostly around 20 cents lower, seeing spillover from neighboring pits and a better world crop prospects. Outside markets contributed to weakness in the grain markets, with a stronger dollar and weakness in crude oil weighing on wheat. September Chicago wheat futures respected support at yesterday's low of $7.97, but a slip through that level could trigger sell stops.

Cash cattle expectations: $1 to $4 lower. The bulk of this week's cash trade occurred between $97 to $98, with wrap-up sales reported at $97 Thursday.

Futures call: Weaker. Futures are called lower based on spillover from yesterday's losses, but are due for short-covering given the oversold condition of the market. But momentum is clearly with bears. Most contracts posted bearish reversals yesterday. Next support for October live cattle lies at the mid-point of the entire trading range, at $104.70 and extends to the mid-May low of $104.15.

Cash hog expectations: Steady to firmer. Early expectations are for steady to firmer cash bids again today as packers are still in need of supplies. Cash sources say next week's marketings are expected to be tighter, which could result in followthrough cash strength.

Hog futures: Mixed. Futures closed mixed yesterday, with nearbys firmer on cash improvement. August lean hogs hold a small premium to the cash index, which is projected to rise 74 cents to $75.26. Given expectations for additional cash strength next week, August futures could see spillover support this morning.

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