Corn ended slightly higher following NASS’s crop condition update Monday evening, and as the trade so far remains skeptical of GFS model output. The EU model also trended just a bit wetter next week, but its solution implies ongoing soil moisture declines into early August. The forecast is neither overly bullish nor bearish, and so we should expect limited price action in the days ahead. Funds bought an estimated 5,500 contracts today.
The question remains the effect of heat and dryness in July on national corn yield, and the potential for any improvement should the pattern change in early August. ARC detailed in this evening’s wire how already yield loss across the Central Plains is impacting the balance sheet. IA will soon be added to list if rains don’t materialize next week.
Otherwise, the 2017 market, longer term, will be one of smaller crop size but reduced demand due to weakness in South American cash market. The net result is the same, and the most probable range in spot futures is pegged at $3.65-3.95 into late year.
US ethanol production tends to decline, seasonally, beyond mid-July, and Wednesday’s EIA report is expected to include a slight correction. Ethanol stocks also erode beginning in mid-summer, and energy markets as a whole should be supported on any modest break as US inventories are drawn down. Even US crude stocks as of last week were very close to the level of last year.
It’s still all about each daily model release, but we remain concerned that national yield potential is capped at 165-166 Bu/Acre.
