Pre-Opening Corn Market Report for 6/21/2006 July corn traded 1 cent higher overnight. Outside market forces are neutral, and there is still some uncertainty on the early July weather pattern.
The market may have pulled back far enough to entice significant demand from major importers, as the USDA has announced sales of nearly 525,000 tonnes (20.7 million bushels) in just the last two trading sessions. While sales are strong, export shipments are also high with 75.3% of the expected total for the year already gone as compared with 62.6% as the 5-year average for this time of the year. As a result, beginning stocks are likely to be revised in the next USDA supply/demand report. With the soaring demand the market needs to see trendline yields in order to hold stocks at a tight but reasonable level. Any indication of lower than trend yield could spark rationing concerns. However, early crop conditions combined with a 10-day forecast that looks to help improve crop conditions has helped pressure the market. If there are 1 1/2 million more acres planted than the March intentions report and yield comes in above trend at 158 bu/acre, ending stocks would come in near 1.964 billion bushels as compared with the current USDA forecast of 1.09 billion bushels.
Good weather is expected to keep fund traders in a long liquidation mode over the near term. Crop conditions were in line with trade expectations Monday night, showing 68% of the crop in good to excellent condition from 70% last week. Rain moving across Iowa on Tuesday was considered a bearish development, as central Iowa was one of the few dry spots in the Midwest over the past week. A lack of heat in the forecast is also seen as negative, as growing conditions in the next week look ideal. Traders await direction from the longer-term maps which will show some idea for early July weather in the next few days. The USDA announced a sale of 110,000 tonnes of corn to unknown destination and also a sale of 126,000 tonnes of corn to Mexico yesterday. Israel is tendering for 60,000 tonnes of corn from the US or South America. In the last Commitment-of-Traders report with options, non-commercial traders (trend following funds) were still holding a net long position of near 225,000 contracts.
There appears to be some chance of a drier period ahead for the western Corn Belt and the central plains but without too much heat. Some rains will hit Iowa in the next few days and the outlook for moderate temperatures with good soil conditions for most of the Midwest suggests improving crop conditions ahead. Cash basis at the gulf was steady to higher due to strong export demand and a slow pace of producer sales. The recent break to near 3-month lows helped trigger aggressive new buying from importers who see little corn available from China, Argentina or others for the coming year. The USDA is in a position to increase demand in the next supply/demand update. It appears unlikely that the corn crop will encounter enough problems during pollination to avoid above trend yield. However, there are still some light concerns for the western Corn Belt if a dry trend remains in place for that region for the next 2-3 weeks. Too much rain appears headed for the eastern Corn Belt.
