- HEADLINES: Fund selling pounds corn to lowest price since April 21; China rumours of corn rolling unfounded; Midday GFS shifts plains rain southward.
- CBT futures are sharply lower at midday amid favourable Central US weather with managed money selling out a portion of their long position. Corn, soybean, and wheat futures are pushing to the downside with July corn pacing the decline. July corn futures fell below last weeks and the late April low to trigger a host of sell stop orders. July corn futures tested key support that rests from $6.10-6.20, the 50-day moving average. The July/December corn spread pushed down a $1.04 July premium before it started to recover. Soybeans and wheat have followed corn on liquidation and “me too” selling.
- There are rumours that China is rolling old crop corn sales forward to new crop. We CANNOT find any confirmation that the state buyers, COFCO or Sinograin, are rolling any of their old crop purchases to new crop. US exporters report that those programs are ongoing and will not be cancelled. However, private US corn sales to Chinese livestock feeders on the books could roll, but tonnage amounts are said to be less than 600,000 mt. But even here the importer is looking at fat margins and will be unwilling to cancel large tonnages. When Chicago corn prices ease, traders suggest that China must be doing something, but often it is just managed money order flow.
- Chicago brokers estimate that funds have sold 40-45,000 contracts of corn. 7-9,000 contracts of wheat, and 12-14,000 contracts of soybeans. In soy products, funds have sold 9-11,000 contracts of soymeal and 2-3,000 contracts of soyoil. The fund selling in corn has been massive.
- US elevator systems report that farmers have slammed shut their bin doors on the decline with cash pushes not matching the futures decline. This is causing farmers to halt cash sales. US farmers do not have much old crop cash stock in their control, but all bushels will be needed with US exporters and ethanol producers fighting for any remaining corn supply.
- The Index Fund Roll starts on June 7, but some of the faster funds may be rolling out of their July positions before the end of the month. A portion of the pressure in July corn could be due to the faster moving fund rolling.
- Based on the USDA March 31 Seeding Intentions report, 8.9 million acres of corn and 12.7 million acres of soybeans were planted in the Dakotas. This would account for 10% of US 2021 corn and 14.5% of soybeans. The deepening Dakota drought will have an important impact on US summer row crop production. Recent rainfall has been too light/widely scattered to cause any material drought improvement.
- Derail estimated that 47% of their corn crop is average conditions, up 1%. The crop that was rated poor as 31% was stable. 86% of the crop post pollinating with 6% of the Parana winter corn crop noted as in maturation.
- The midday GFS weather forecast targets the harvest areas of Texas/Oklahoma and Southern Kansas with 1.5-4.00″ of rain. The wheat harvest was expected to start this weekend in Central Texas and then push northward to Kansas in mid-June. All this coming rain will not help seed quality with fungal diseases to flourish if the wet weather persists.
- Below normal rainfall will continue across the N Plains and the Northern third of the Midwest with near to above normal rainfall for the remainder of the Central US. High temperatures range from the mid 70′s to the upper 80′s.
- Key chart support was broken, and corn futures fell sharply on fund liquidation. We cannot find much that is fundamentally different today. China is not rolling or cancelling large amounts of their existing US corn purchases with the break providing a new purchase opportunity in new crop. It does not take much volume to push Chicago values up and down with the push today strongly to the downside. Corn, soybeans, and wheat are below our downside price targets and undervalued. But Central US weather is favourable and that is what traders are focused on for now. The risk vs the reward has shifted back to the bulls, but there is no chart-based sign that a bottom has yet been formed. We see December corn under $5.20 as too cheap.