Dec. Corn Back Below $5, Now What?

Overnight highlights: As of 6:00 a.m. CT, corn futures are trading 4 to 5 cents lower, soybeans are 5 to 8 cents lower and wheat futures are narrowly mixed. Based on current weather models, corn and soybeans will remain under pressure this morning. Cattle futures are expected to favor a slightly firmer tone this morning, while hog futures are expected to open mildly firmer. * Dec. corn back below $5. Overnight price action dropped Dec. corn futures below $5.00 as forecasts offer hope that the recent hot, dry spell will be replaced by cooler and wetter conditions through the 10-day window. As a result, traders feel corn will not be stressed during the first big wave of pollination across the Corn Belt. While weather remains a key focal point, demand will be key to near-term price action. When Dec. corn futures dropped below $5.00 two weeks ago, it sparked a strong wave of foreign buying, with China purchasing upwards of 1.4 MMT of U.S. corn. That kind of demand is again needed to stop prices from falling farther if traders deem weather forecasts to be price-negative. The long and short of it: While traders’ focus is on weather, it’s likely demand that will determine how far prices slide -- unless there’s a shift to more threatening weather through the end of the month. * Japan closer to lifting ban on U.S. western white wheat? A delegation from Japan is in the U.S. this week in hopes of moving closer to lifting the ban on imports of U.S. western white wheat. The group met with USDA officials on Wednesday. While details of that meeting are not known, it’s believed the country is seeking reassurance from USDA that shipments will be GMO-free when it decides to allow shipments again. Reuters cites industry sources in Japan as saying the country wants USDA to test a composite sample of each western white wheat shipment, give shippers a letter that certifies the shipment contains no GMO wheat and send samples to Japan for testing there before each vessel arrives from the United States. The long and short of it: Japan has previously said it plans to restart imports of U.S. western white wheat sometime in August. Unless there are some hiccups, it looks like that remains a likely time frame. * Beef demand concerns linger. Traders already had concerns with red meat demand and now the heat wave blasting much of the country is likely curbing red meat consumption even more. While the heat wave is temporary, it will take time before demand concerns ease, especially for beef. With Choice boxed beef prices hitting record levels this spring, traders are concerned it could have a lasting impact on demand. The demand concerns are reflected in cattle futures. Despite tight market-ready supplies, cattle futures hold very little premium to the cash market, suggesting the demand side of the market is holding prices back. The long and short of it: The drop in boxed beef prices should be deep enough now that retailer buying starts to pick up. But until beef demand concerns are gone, the cattle market will struggle to find sustained buying interest. With that said, the fundamental outlook for cattle is bullish.