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Price action: July corn futures rose 3 cents to $7.91 1/2, the contract’s highest closing price since May 5. December futures surged 17 1/4 cents to $7.53, a lifetime high settlement for the contract.
Fundamental analysis: New-crop futures led the corn market higher after USDA lowered its yield projection more than expected, fueling concern that weather-delayed U.S. plantings will further tighten global grain supplies with drought in South American and war in Ukraine already disrupting markets. USDA, in its monthly Supply and Demand Report, dropped its 2022-23 U.S. corn yield estimate to 177 bu. per acre, down 4 bu. from a previous trendline forecast and unchanged from 2021-22. Analysts expected a yield closer to 179.6 bu. per acre. The yield projection “is based on a weather-adjusted trend, estimated using the 1988-2021 time period, assuming normal summer growing season weather but lower to reflect the slow pace of planting progress as of early May,” USDA said in today’s report.
The yield surprise overshadowed other USDA figures that leaned more bearish. USDA estimated corn stocks at the end of the 2022-23 marketing year at 1.36 billion bu., down 80 million bu. from this year but 8 million bu. above the average pre-report trade estimate. Also today, USDA announced daily sales of 612,000 MT of corn to China, with 68,000 MT for 2021-22 and 544,000 MT for 2022-23. Today’s report was USDA’s first corn sales announcement to China since April 28.
Technical analysis: Corn futures posted the third straight daily gain and remain firmly bullish, though July contract pulled back from an initial post-USDA upturn and ended near the middle of the day’s range. New-crop December, by contrast, closed near its high. July futures are poised to post a fifth weekly gain in the past six and could further strengthen the market’s technical standing with a close above the 20-day moving average at $7.96 and/or $8.00. A strong close Friday could have bulls targeting the contract high at $8.24 1/2, posted April 29, but the market could also be vulnerable to some pre-weekend profit-taking. Initial support is seen at this week’s low of $7.69.
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