The corn market has somewhat stabilized in the last week despite impressive condition ratings. As private crop tours continue to show for the most part impressive yields, demand has picked up near term while longer term export prospects look promising. Non commercial and non reportable funds have now increased their short position in the market to 53,227 contracts and increase of 35K shorts last week. It’s important to note that since the week ending June 24th, funds have gone from a net long of over 300K contracts to a net short of 53K. For corn it’s a sizable reversal in just six weeks, but not surprising given the optimal growing weather and crop condition.
With the market’s somewhat oversold condition, it may take a surprisingly high yield above trend in this Friday’s report to push prices to new lows. Trend and Index following funds have priced in a national average between (169-172) bushels per acre for the report versus the 168 yield the USDA forecast last month. If this month’s estimate from the USDA comes in at the lower end of production we could see a near term bottom until harvest. Export sales and inspections have improved in recent weeks as domestic prices in Brazil are well above world prices with business shifting to the U.S. Brazil’s secondary corn crop was devastated this year by excessive rain in May and an early frost in June.
Friday’s report could highlight another 4 million tonnes cut from total Brazilian production. The market will also be keeping an eye on Ukrainian production as weather there has turned hot and dry during their key yield development time. I look for corn prices to firm up ahead of the August 12th WASDE Report. An aggressive play to take advantage of higher prices longer term consists of buying one March 17 390 call while selling 2 of the March 17 Corn 3.00 puts for even money.