Short Squeeze or Short Supplies? July Corn Futures Shoot 80¢ Higher Tuesday

Just a day after USDA released the July WASDE report, which showed a shocking drop in all-wheat production and yield, the July corn contract traded 80 cents higher mid-day Tuesday. Analysts weigh in on the reason.
Just a day after USDA released the July WASDE report, which showed a shocking drop in all-wheat production and yield, the July corn contract traded 80 cents higher mid-day Tuesday. Analysts weigh in on the reason.
(AgWeb)

Just a day after USDA released the July WASDE report, which showed a shocking drop in all-wheat production and yield, old crop corn prices skyrocketed.

While corn futures were green across the board, it’s the July contract that attracted attention, trading 80¢ higher mid-day Tuesday.

While USDA raised its new crop production forecast, it showed tight old crop stocks with a bump in feed and residual use. Despite the adjustments, Pro Farmer's Brian Grete says Tuesday’s big price move wasn’t due to Monday’s USDA report.

“The move in July corn has nothing to do with Monday’s WASDE report or supplies,” says Grete, editor of Pro Farmer. “It’s a short squeeze ahead of tomorrow’s contract expiration. Someone is or was caught short and they had to get out.”

Chip Nellinger of Blue Reef Agri-Marketing agrees.

“It’s likely someone was trapped short ahead of the last trading today tomorrow” Nellinger says. “However, other factors may be tight old crop stocks and strong basis.”

Another Weather Rally Brewing?

The National Weather Service (NWS) released an updated model Monday that showed an amplified ridge has the potential to bring back heat to the Northern Corn Belt. The Climate Prediction Center says it has high confidence the excessive heat will start July 20. The risk sits right over the Northwest, with the possibility to extend from California to Wisconsin.

An amplified ridge will bring the potential for excessive heat next week across the state. The Climate Prediction Center has high confidence for excessive heat to start on July 20th through the 21st. Slight to moderate confidence in excessive heat also exists through July 26th. #ndwx pic.twitter.com/cqTM7Q4qIH — NWS Bismarck (@NWSBismarck) July 12, 2021

“With areas still missing rain, trendline yields are still very questionable and extended weather models show the return of heat to the Western Corn Belt,” Nellinger adds. “Just a 3 or 4 bushel per acre drop from trendline yields would result in carryout dropping toward 1 billion bushels.”

While market analysts say the short squeeze was the main driver of July corn’s explosive action Tuesday, it hit a key technical price point, and could set a precedent for what’s to come.

“July corn going off the board with strength, and into new contract highs north of $7.50, underscores how tight supplies are and how little margin for error there is when it comes to needing a trendline yield for new crop,” Nellinger says. “A substantial drop below 175 or 176 bushels per acre could lead to explosive price action in order to ration demand.”

 

Latest News

DOE Rejects API Appeal on LNG Export Suspension, Ensures Review Continues
DOE Rejects API Appeal on LNG Export Suspension, Ensures Review Continues

The Department of Energy (DOE) has declined a request by the American Petroleum Institute (API) and others to lift the suspension on new liquefied natural gas (LNG) export approvals.

Oil Testing Offers Value: Like a Blood Test for Tractors and Combines
Oil Testing Offers Value: Like a Blood Test for Tractors and Combines

Oil and fluid testing answers both short- and long-term questions about the internal condition of engines, transmissions and hydraulic systems.

Airplane
Still Waiting on SAF Announcement

While the White House aims to boost production of SAF, it has faced challenges in defining rules for tax credits, particularly for crop-based forms of the fuel.

Corn Prices Higher After USDA's Bullish Reports, Soybeans Flat: Where Do the Markets go Now?
Corn Prices Higher After USDA's Bullish Reports, Soybeans Flat: Where Do the Markets go Now?

Grains end mixed with strong gains in corn in reaction to USDA's 90 million acre estimate and lower than expected stocks. But how much higher can corn go? Garrett Toay, AgTraderTalk, shares his thoughts.

Where Did All the Corn Acres and Principal Crop Acres Go? The Two Biggest Questions from USDA's Big Prospective Plantings Report
Where Did All the Corn Acres and Principal Crop Acres Go? The Two Biggest Questions from USDA's Big Prospective Plantings Report

USDA says farmers intend to plant 90 million acres of corn this year, which is lower than the trade expected prior to USDA's big Prospective Plantings report.

USDA Shocks the Markets with 90 Million Corn Acre Estimate:  Where do Corn and Soybean Prices Go From Here?
USDA Shocks the Markets with 90 Million Corn Acre Estimate: Where do Corn and Soybean Prices Go From Here?

USDA provides bullish reports for corn, but neutral to bearish for soybeans and wheat. Brian Splitt, AgMarket.Net, has details.