December corn futures finished the week strong closing up 12 ¾-cents per bushel on Friday afternoon at $3.87. Friday’s gains were fueled by a mildly supportive September 2015 WASDE report. In that report the USDA lowered the 2015/16 US corn yield 1.3 bushels per acre to 167.5 bpa, which was also slightly below the average trade guess of 167.6 bpa. Total US corn production fell 101 million bushels month-on-month to 13,585 million bushels. However, arguably the most supportive adjustment made by the USDA was a 121 million bushel cut to US corn ending stocks. The 2015/16 US corn carryout was lowered to 1,592 million bushels versus 1,713 million in August and the average trade guess of 1,643 million bushels.
Just how bullish was this report?
Here are a few key considerations:
- The 2015/16 US corn crop is still projected to be the 3rd largest in US history trailing only 2014/15 (14,216 million bushels) and 2013/14 (13,829 million bushels).
- The 2015/16 US corn yield is still projected to be the 2nd highest in US history trailing only 2014/15 (171.0 bpa).
- US corn ending stocks of 1,592 million bushels are still the 2nd highest since 2010 and 550 million bushels higher than the average US corn carryout from 2010 – 2013 (1,042 million bushels).
- The most comparable carryout figure relative to this year’s current forecast was 2007/08’s ending stocks projection of 1,624 million bushels (+32 million versus 2015/16). In 2007, during the October and November harvest timeframe, December corn futures averaged $3.69 per bushel. This compares to Friday’s CZ5 close of $3.87.
From a state-by-state perspective the USDA lowered its estimated yield projections for 9 out the 12 top corn producing states in the country versus a month ago. However the average yield decrease across all nine of those states was just 2.2 bpa. Kansas and Ohio experienced the largest reductions with Kansas’s state corn yield lowered 4 bpa to 148 bpa and Ohio down 5 bpa to 163 bpa. North Dakota saw the biggest gain with its yield raised 2 bpa to 128 bpa. See charts at end of article for reference.
Can corn continue to rally early next week?
I would not be surprised to see some follow-through support on Monday’s opening; however from a technical perspective December corn futures will have to immediately contend with the 100-day moving average directly overhead at $3.88 followed by the 50-day at $3.943, both serving as key resistance levels (see chart below).
Friday’s Commitment of Traders report showed the Managed Money long in corn falling to just 47,261 contracts as of the close on September 8th, down 29,725 contracts from the previous week. Friday’s price action suggests they probably reversed course momentarily, adding some longs going into the weekend; however we’ll likely see how serious they are about CZ5’s upside price potential on Monday and Tuesday. If corn fails to close above the aforementioned key moving averages, December corn futures could easily give back some or all its 24-cent higher weekly close. The 5-year price seasonal still favors lower price action into the end of the month. I’m still treating rallies as range bound/selling opportunities given the more than adequate supply cushion. The September Crop report did not materially alter my longer-term negative price bias.
December Corn Futures Chart
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