MT. JULIET, Tenn. (DTN) -- The December corn futures contract broke above key resistance levels to close at $5.74 1/2 on June 15, 2023, signaling the shift to a bull market as drought concerns weigh on production estimates.
"If there was an argument between the bulls and the bears today, the bears are throwing in the towel," DTN Lead Analyst Todd Hultman said, noting the contract's 25 1/4-cent jump from the day before. "The bulls now have the momentum."
By closing above $5.56 per bushel, the 100-day moving average price, it indicates traders increasingly believe concerns about drought and the prospect for lower yields.
"I think it's fair to say we can take the most bearish scenarios from earlier this year off the table," Hultman said. He thinks drought will put a dent in the U.S. corn supply this year, but that Brazil's potentially record corn crop complicates the price picture.
"It could be a tough, wheat-like situation where supplies get drawn down tighter, but if we lose out on a big share of the export market to Brazil, maybe it doesn't show up in the enduring higher prices that we would normally expect in a situation like this," Hultman said.
New-crop soybean prices are also likely to break into bull-market territory this week, Hultman said. The November soybean futures contract closed up 52 1/4 cents at $12.92 per bushel, 3 cents shy of the 100-day moving average.
"They were slower to respond to the dry weather concerns, understandably, because we don't typically think of beans as being vulnerable early in the season. But in the past week, the buying has really picked up significantly."
Hultman said the latest U.S. Drought Monitor, which reflects weather up until June 13, drew many comparisons to 2012. While the maps have eerie similarities, the weather forecasts are quite different. In 2012, a La Nina-fueled drought drove the national average corn yield to 123 bushels per acre.
"The Drought Monitor that came out this morning wasn't good news for anybody outside of the High Plains and a couple of spots here and there across the western Corn Belt," DTN Ag Meteorologist John Baranick said. You can view the map here: https://droughtmonitor.unl.edu/….
The current drought map may share similarities with 2012, but Baranick said climate conditions are different. With El Nino currently driving weather trends, additional storm systems are likely to move over the Corn Belt through the next several weeks and months.
"It's not that I'm expecting a heck of a lot of precipitation to come quickly and often and regularly, it's just that I don't see all the doom that everybody else is worried about, because we do still have an active pattern," unlike 2012, he explained.
Baranick said there are fractured chances of rain in the next week to 10 days, but by the end of next weekend, the model is favorable for development of a broader storm system in the Corn Belt.
It's too far out to trust precipitation totals, but "it does point to a better setup for getting more rainfall across the bulk of the Corn Belt."
For Baranick's latest forecast, see "Concerns About Increasing Drought in Corn Belt Mounting, Some Optimism Lies Ahead," https://www.dtnpf.com/….
Katie Dehlinger can be reached at firstname.lastname@example.org
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