Favorable Weather and Higher Yield Estimates Keep Pressure on Corn

Continued rain through the central Corn Belt, lower crude oil, a higher-than-expected corn yield estimate from StoneX, and a lack of Chinese demand news pressured prices through the day before a modest late session rally pulled wheat to a positive close and corn and beans off important technical moving average support. This week has been dominated by improving US weather and progress with Iran, but positioning ahead of the weekend and probable fresh news on Iran with an eye on the August 12th USDA report will become more important for the remaining two days of the week.

News and Notes:

• An unusually wet and seasonally cooler to August continues to weigh on the markets as the forecasts since last week have consistently had plenty of rain for most of the Corn Belt while confining the extreme heat to the southern Plains. Some heat has been pulled into the 10-14-day model, but that is too far out for concern. Europe’s weather could not get any worse but so much crop damage has been inflicted, any late season change will not have much positive impact.
• The December daily corn chart is on Page 2 and fell today to test important technical support at the 50-DMA (green line) after falling through the other big 3 moving averages on Tuesday. Since the relief rally after the June 30th acreage report and the post July USDA report rally, $4.50 has acted as the bottom of the range while the late hot/dry forecast posted the summer highs at $4.92. November beans also tested and closed above important technical support, so the trade into the weekend and Friday’s close will be important technical considerations before next Wednesday’s USDA report.
• Winning streaks are always fun to write about, and we have several impressive and important going on so far in August. The Dow index has been higher for 5-straight days and making new all-time highs the last two sessions. The S&P and NASDAQ indexes ended their same streaks today but all three have gained 3-4% in the last week. Cotton is higher 4 of the last 5 sessions to post new 2 ½ month highs. Feeder cattle have been helped by falling corn and beans and higher stocks and have rallied for 7 straight sessions to post new 2 ½ month highs and rally nearly $20 off the late July lows.
• Further details were announced about the ceasefire and reopening negotiations with Iran and (shocking) the releases from the White House are very optimistic it is close to being over and the Straits fully reopened for all traffic. Crude oil continued to drift lower, but even with all the optimism, crude prices are still only $8 off the Tuesday morning highs. September diesel futures did not take out Wednesday’s low ($3.6725) in today’s trade before rallying to close at $3.7828 with modest gains. The world diesel situation is dramatically different than the world crude, unleaded or natural gas landscape, as the world simply does not have enough diesel refining capacity to meet world demand. Diesel was 60-cents a gallon off the late July highs, so if you need some fuel and your suppliers’ prices are reflecting the pullback, top off your tanks.
• China was absent from the daily export report but a routine corn sale to Mexico was announced. Weekly ethanol production was off slightly from last week, but still up 2% over the same week last year. Corn used for ethanol demand is not expected to be changed in next week’s report.
• The brokerage and analytical firm StoneX released their crop estimates late Wednesday with a surprising 184.8 estimate. This is the highest of the most closely watched private estimates, and if realized would add about 115 MBU to production, which is not a killer, but that yield and an acreage increase would be a decidedly bearish gut punch for the bulls. StoneX has been consistently good with the yield estimates in recent years, but guessing if the USDA is estimating what they think final yield will be or what current yield could be, is always the hard part of these estimates.

It is hard to maintain a bullish trend when there is rain falling in Iowa in early August. Add in the potential reopening of the Straits and this week’s trading results are not that surprising. The lack of news and transparency on the preparation for the trade meeting with China is September and what is happening with the work on year-round E-15 has been absent recently, but is still happening in the shadows and hopefully, some positive news from both will be announced soon.