Technically Speaking

The corn belt in the last several weeks has had good rain coverage, effectively narrowing that area experiencing some form of drought. With last week's crop progress report indicating that corn was 83% planted as of Sunday, and slightly ahead of the 5-year average, there is no doubt that the U.S. corn crop is off to a favorable start. Still looming are the final acres planted and how much of the area that has not yet been planted could go into the prevented planting program.

Monday's June 3 crop progress report is expected to show the portion of the corn crop that is rated good to excellent, could exceed 70%. While U.S. corn export and ethanol demand (up nearly 5% last week) remain solid, the Argentine corn basis is on a downward slide with close to 30% of that crop now harvested. Supporting corn is the fact that Ukraine's corn area and production is likely to be quite a bit lower this year and there is still some question on the size of the Brazilian corn crop. There is also a drought going on in Mexico which could increase the number one U.S. importer's demand in the coming year. However, technically, the December corn momentum is weak, and there is little support on the chart until we get to the $4.50 area.

So, while longer-term, lower world production is likely to be good news for U.S. corn exporters, it just seems like we have a bit more downside for corn to endure in the short run. Longer-term, the prospect for U.S. corn exports should brighten considerably, and the jury is still out on final acres, yield and prevented planting, which could send the current comfortable carryout below the 2-billion-bushel mark.

July Soybean Meal Futures:

July soymeal futures as of early Monday had fallen for four of the past five days. Managed money funds have added to a growing net long in soymeal that amounts to close to 120,000 contracts as of last Tuesday. That would be the largest net long in soymeal since the week of Dec. 5, 2023. Granted, U.S. soymeal export sales this year have been record large, and soybean crush has been strong. However, with Argentina back in the exporting game following last year's historical drought, it should once again be the world's number one soymeal exporter.

The last time that funds had a position of this size, July meal plunged close to $75 per ton from there. Keep an eye on the soymeal market for funds to begin liquidating that position. It is surely possible that they could add to the long, but currently, their position is just 30,000 contracts shy of the largest long we have seen. Momentum remains down, but is approaching the oversold zone, so a short-term bounce is possible.

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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.

Dana Mantini can be reached at Dana.Mantini@DTN.com

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