Daily comment for Tuesday, June 16

Nothing was confirmed by the close, thus part of the reason for the pullback, but the chatter was enough to put a charge into the trade and it showed up in the price action. Whispers have been building that they could drop their 10 percent import duty any day now so perhaps we will get an update on this in the coming days.

July corn traded as much as 14 cents off yesterday's low before the buyers backed away, giving back a fair piece of that by the close and settling at the mid-point of that range.

Crude oil continues to get hit, sinking to its lowest spot levels since March as more of the war premium continued to bleed out...in fact, we are less than $10 before where spot crude prices were trading before the war started.

Key Points/Developments

Technicals: July corn traded higher on the week briefly, but again failed to challenge the 424 area, eventually closing lower. That remains resistance for the time being while support is near 405 and then 397.

July soybeans power through our 1120 resistance area before bumping it's head on the 200 day moving average near 1137. That remains resistance for now as does 1147 and 1158. 1120 now becomes a big support level.

Spreads: The July/November carry had a volatile day in its own right as it originally sold off on the Chinese rumor do to them supposedly being interested in new crop only, but firmed late to close higher at 16. Its recent low is near 21.

The July/Dec corn spread didn't follow suit, closing at its widest level for this move, at 29 cents. I. This level represents a good limited risk buy in our opinion, because that inter-crop year spread very rarely trades this wide. There are two potential bullish items that could tighten it in our opinion--very strong farmer holding at these very low prices, and the possibility that China finally steps in and makes some corn purchases.

Weather: TStorm left both corn and soybeans at Slightly Favorable today, with winter wheat held at Neutral.

The pattern stays wet and active. The near term focus is on severe weather, with a strong system set to fire storms across the southeast half of the Corn Belt and a real chance of a derecho in and around central and northern Illinois and Indiana. If one develops, the thinking is the winds would run weaker than the 2020 Iowa event and come earlier in the crop's development.

A similar setup follows this weekend over a wider area, and with the jet stream parked over the central US, the rains look to keep coming right into the end of the month.

Markets/Trading Implications

It was a nice day in beans even with the close coming in off the intraday high. The fact that July held most of the surge and finished above that nearby resistance tells us the buying interest was real, not just a knee jerk to a headline.

Our guess is we see some follow through buying regardless of what comes next, and that goes double if any of the Sinograin talk actually gets confirmed in the coming days.

We are eyeing the 1145 to 1150 area on the charts as a spot where we would think about advancing some old crop bean sales. We are not there yet and we are not pulling the trigger today, so stay tuned and we will be in touch if that changes.

Corn is the tougher read after closing modestly lower on a day beans found this kind of life. We would have to think it stays tied to the bean market and the China story near term, but as we have been saying, we strongly believe we are underpriced in general based on the current state of fundamentals. 440 would be a target in the near term in July futures.

Other Notes

• Tstorm ran a study comparing this year's early weather setup to past analog years, and the results point to a big crop likely getting bigger. The historical comparisons suggest mostly non-threatening situations once these initial patterns are in place, which would put corn somewhere in the 185 to 193 range against the USDA's current 183. Beans came out similar, with the study suggesting 53 to 55 versus the USDA at 53, and 1993 the only really poor year in the set, knocked down by a once-in-a-century flood.
  

  Worth keeping in mind the study stopped short of factoring in August rainfall and temperatures, since those weren't part of what was presented, so there's still a good chunk of the growing season left for the weather to turn.

Static Notes

• The Commitment of Traders report for trading through Tuesday, June 2 showed actively traded funds sold a net 90k corn contracts, taking net longs down to 115k. They sold 34k soybeans, bringing net longs down to 156k, and sold 39k Chicago wheat, pushing net shorts up to 58k.
  In the corresponding week of price activity, July corn lost 18 cents, July beans lost 21 cents, and Chicago wheat lost 33 cents. In the three days since this report, corn lost another 23 cents, soybeans lost another 44 cents, and Chicago wheat lost another 23 cents. This all suggests that funds are likely near flat in corn, which is pretty remarkable considering where they were just a handful of weeks ago.

Have a nice evening!

Clayton and Taylor

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