DID CORN CONFIRM A BOTTOM?
Overview
Grains close mixed, as corn gets some follow through strength, while soybeans give back half of yesterday’s rally. It was the wheat futures that led the way today
The main thing supporting our markets right now is drought concerns. We have drier weather in not just the US, but also in Canada, Brazil, Ukraine, and Australia. We touched on this yesterday, but many sources believe we are in for a Super El Niño type of event. Which would make our corn belt extremely dry, while making Canada very hot.
Going forward, weather is going to outweigh every other factor. It is going to be the number one factor that will push us higher, or perhaps lower.
The funds are still very short corn and wheat. Do they want to be that short going into a long weekend if we still have dry forecasts and concerns? You wouldn’t think so. I personally wouldn’t want to be short going into the long holiday weekend with drought and all the other uncertainties.
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In case you missed it, Sunday's Weekly Grain Newsletter
Will We Replicate 2012 or 2013? Read Here
Today's Main Takeaways
Corn
Corn follows up yesterday's rally with some follow through strength, with July closing up 6 1/2 cents
The drought concerns globally have provided support to corn to start the week. The corn belt and I-states aren’t necessarily extremely hot, but they are very dry. Forecasts show they will continue to get drier with some models showing almost no rain for at least the next two weeks.
Even Brazil is now concerned about drought and their second corn crop. This is also something we had anticipating for the past few weeks, and another reason why those Chinese cancellations might actually have been a double edged sword.
The South America expert Dr. Cordonnier said yesterday that:
"Dryer weather has encomppaded most if not all the safrinha corn area of central and south-central Brazil. There is little rainfall in the forecast for central Brazil with a slight chance of rain for south-central Brazil. Some of the safrinha corn areas have been dry for about 4 weeks with little rainfall in the forecasts. The Brazilian National Weather Service is warning humidity may drop as low as 20%."
If Brazil does remain this dry, they could be in for some problems down the road. As could China, as they were initially expecting this massive crop they could snag for cheap.
We had been talking about this potential drought for months now. Especially when planting got off to a fast start, most looked at that as somewhat of a bearish factor. But instantly we knew that all the fast planting meant was that it was dry especially in the I-states.
North Dakota is a big question mark surrounding planting. As the argument is just how many acres will be lost to preventive plant. In the end of today’s update, I included a write up from Wright on the Market where he goes over that situation more.
I know we have compared this year to 2012 time and time again. Some people say there is no chance we experience a drought like that again. Perhaps they are right. But if you were to take a look at soil moisture and drought monitors comparing the two years, we are already in a worse situation than at this same time in 2012. If we do indeed get this El Niño event that all the weather gurus are predicting, we do have the possibility to see the corn market replicate something similar to that of 2012. So really all I am saying is that if it does remain dry, which nearly every model out there indicates it will, our markets have a great chance to see a significant rally.
If it stays dry for another 10-days (the current forecast suggest it will) top soil levels are expected to become the driest since 2004. Eclipsing that of 2012. We also have 50% of US corn drier than normal for the last 30 days. There is also a definite probability that April-May might be the driest across the 7-state corn belt since 1992. So is the market underestimating weather premium and drought? They very well could be.
Is the bottom in for corn? The action is corn has been pretty solid. We got the rally to start the week with some follow through strength again here today. Some would say that follow through strength is an indication of a bottom. If we haven't made it yet, I can imagine we are awfully close to doing so. If forecasts remain dry in the US and Brazil, I don't see why we wouldn’t continue higher from here. With the chance to go much much higher this summer if weather works out in the bulls favor. Personally I see a lot more upside than downside, and think drought will start to become more evident ultimately driving us higher in June.
*Scroll to the end of today’s update for maps showcasing lack of moisture and drought
Corn July-23
Soybeans
Soybeans were the outlier today, being the only of the grains to finish in the red. As they give back over half of their gains from yesterday's rally. Yesterday was soybeans biggest single day rally since last September's crop report.
Beans saw some pressure from….
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INCLUDED IN TODAY’S EDITION
Is wheat on the verge of a big move?
Why North Dakota planting struggles are so important
How bad is this drought?
What bulls will need for beans to push higher
Risks that beans face
Is the bottom in for wheat or beans?
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Some Past Updates
5/22/23 - Market Update
Drought Concerns Rally Corn & Beans
Read More
5/21/23 - Weekly Grain Newsletter
Will We Get Repeat of 2012 or 2013?
5/19/23 - Market Update
Grains Fail to Gain Momentum
5/18/23 - Market Update
KC Joins Sell Off
5/17/23 - Audio
Black Sea Pressure & Games From China
Read More
5/15/23 - Audio
If You're Short Wheat.. Be Ready to Sleep On Street
5/14/23 - Weekly Grain Newsletter