Price action: December futures saw volatile action following today’s reports, but ultimately fell 9 cents before settling at $4.87 1/4, marking a 10-cent loss on the week.
5-day outlook: Corn futures were unsure of how to react directly following the reports today, immediately spiking higher and trending higher before breaking down this afternoon. Bulls were looking for a yield below the average analyst and were obliged with a 175.1 bu. per acre yield, below the average forecast at 175.7 bu. in the Bloomberg survey. This compares to 177.5 bu. per acre in the July report and ultimately led to the USDA balance sheet contracting 60 million bushels from July to 2.202 billion bu. Demand is also seen as falling, with exports falling 50 million bu. month over month, Food, Seed, and Industrial use falling 20 million bu., and the Feed and Residual estimate falling 25 million bu. This is likely in part due to the reduced production forecast and the poor export pace maintained thus far.
The report overall was not overly bearish, but corn is seasonally bearish throughout August and the report was not bullish enough to change that trend. Price has thus far been supported by the July 13 low at $4.81, a level that will be key to prevent a trip down to the $4.50 area. Today’s bearish momentum will likely continue over the next week.
30-day outlook: Condition ratings experienced a bump last week and are likely going to see another rise in Monday’s report. Rain and moderate temperatures have reduced crop stress and have opened the door for favorable finishing. While top-end yield prospects have been taken out, a record yield is still on the table. World Weather Inc says, “Yield potentials in nearly all of the Midwest will be maintained or improved during the next week,” though some heat is expected to come into the region late next week. Rising condition ratings over the month of August are against the seasonal bias, but when it does happen, the USDA has always raised yield in the September Crop Production report. Favorable finishing weather will likely continue to weigh on prices over the next month.
90-day outlook: Corn bulls will continue to fight an uphill battle as combines start to roll. Brazilian corn is hitting the world market and the U.S. faces logistical issues and more expensive prices than our South American counterpart. The U.S. continues to lose market share of the world export market and the Brazilian record crop will be no help in fixing that this crop year. Domestic demand is also seen as falling, evidenced in today’s Supply and Demand reports. The lack of demand and seemingly expanding balance sheet will weigh on prices over the next quarter, though demand, particularly export demand, can pick up at a moment’s notice.
