The Brazilian real captured roughly half of Thursday’s loss, and in general it was a much better day for raw materials. Crude rallied $1/barrel, with ethanol margins rising slightly. Prevailing trends still include much cheaper South American offers beginning in July, but also a falling US dollar and cool/wet Central US weather, and as such ARC maintains that the long-established range will hold through pollination – which may not occur until mid/late July across the Eastern Corn Belt.
Managed funds as of Tuesday held a net short position worth 204,000 contracts, down just 5,000 on the week. ARC estimates their net position today at a still sizeable 192-195,000. Note that we hear of stand issues in parts of the E Corn Belt, which are not likely to improve amid the weekend’s rain, which in parts of IL, IN, OH and KY will reach upwards of 2.5-3.0”. No major temp pattern change is expected through the very end of May. It’s unlikely that funds will expand this net short without a more favorable US weather pattern developing.
Rallies will struggle as export demand slows. Brazilian basis for Aug-Sep fell slightly overnight, which was expected. South American corn is offered in late summer/early fall at discounts of $.15-$.25/Bu below US origin, and the cash market there is not likely to bottom for another several weeks.
It’s difficult to project corn futures outside of a range of $3.65-3.90, basis spot. Downside is limited near term, but our work indicates rallies to $4.00+, Dec 17, should be used to catch up on sales.