December corn last week broke above the key $4.90 level, and after a stronger start in response to the weekend attack on Israel by Hamas, had now moved back under that level early Monday. However, it appears that corn is trying to bottom at a time when corn and soybean markets typically do put in a bottom. The 2023 corn harvest is likely to be 35% to 40% harvested once the crop progress report comes out on Tuesday (delayed by the Columbus Day holiday).
While it does look like a rounding bottom, corn has some obstacles to face in changing what has been a clearly bearish trend since the end of July.
When the October USDA report is released Thursday, Oct. 12, traders are looking for an ending stocks number smaller than 2.221 billion bushels, but still 2.138 -- a comfortable stocks level and the highest in 7 years.
Granted, with good weather, both Argentina and Brazil are projected to have large corn crops, but there is a long way to go with Argentina at just 14% and Brazil's first crop at just 28% planted. There are some bullish weather patterns to get through with Argentina much too dry as is northern Brazil, and southern Brazil much too wet, with flooding.
Adding to the potential for U.S. corn exports, which are currently 9% higher than last year, is the dangerous situation in the Black Sea with Russia pounding port facilities. U.S. corn is now very competitive with Brazil on a FOB basis, suggesting a pick-up in demand in the next several months.
Keep an eye on December close, with another solid rally above $4.90, and new-found U.S. competitiveness in world corn expected to ratchet up demand possibly leading to at least a short-term move higher.Chicago December Wheat
We have tried several times to call for U.S. wheat markets to reverse the bearish trend that has been relentless since July 25, but all to no avail. Russia's dominance of world wheat has pressured the wheat markets. That continues today but could slow in the coming months. The persistence of Russia's attacks on Ukraine's Black Sea ports is also likely to keep Ukraine's wheat exports slowing.
Chicago wheat is flirting with the 50-day moving average, which has not closed above since the end of July. This is an area that, if penetrated, typically will get funds to buy. Managed money funds, as of Oct. 3, were revealed to still be carrying a net short of 99,000 contracts of Chicago wheat. U.S. soft red winter wheat is now very competitive in world markets -- witness the purchase by China of 120,000 metric tons last week, and constant rumors of more in the works. Keep an eye on Chicago wheat, and if funds decide to cover it, we are likely to see a nice run-up in wheat in the coming weeks.
Dana Mantini can be reached at Dana.Mantini@DTN.com
The comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of commodities, futures or options involve substantial risk and are not suitable for everyone.
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