Weekly Analysis

Corn report – 11/09/2022

Corn finishes the week strong, moving to a key area of resistance ahead of the September WASDE report!

Indices

Futures

Forex

December Corn’22 (ZCZ22) – Friday’s strong move to the upside takes corn right into a key area of resistance. The move ahead of the WASDE report. The decisive close needs to be met with follow through buying but we look poised to see some momentum. Short term targets will look to overcome 690.00 and a test of the 700.00 which should act as a significant psychological barrier. We are looking at 708.00 as a good area to do some selling if you are a grower or holding a long futures position.

• Corn futures finish the week strong with 14.60 – 24.00 cent gains across the board of futures. September was the strongest performer closing the week at 698.40 (up 24.00 cents) and December’22 or ZCZ’22 closed at 685.00. Trading for the front month ZCZ’22 took place between 654.00 and 683.60.
• The USDA released a statement on Friday which confirmed 4 weeks of export sales reports will be released on Thursday 15th September. The reports for the period ending 21st and 28th August will be combined into a single report. In addition, two separate reports will be released for the period ending 1st and 8th September.
• CFTC’s weekly commitment of traders report revealed some further buying from the funds along with some short covering. The managed money group had increased their position by 5,012 contracts, taking their overall position to 226,479 contracts net long.
• The September WASDE report will be released tomorrow at 12.00pm ET. Private estimates of the U.S. corn yield continue to fall to the low 170’s bushels per acre. It will be interesting to see how sharp the USDA are on their revisions as the market looks to have already priced in this reduction.
• Analysts are looking for U.S. corn stocks to reach 10 year lows at 1.217 billion bushels due to the smaller crop estimates (table below).

• A high pressure system provides some cool temperatures and thunderstorms over the weekend and perhaps the first sign of fall in the U.S. The hot temperatures look to return next weekend (weather map below) which will impact Indiana, Illinois, Iowa, Ohio and Minnesota which are already running dry.
• According to data from the National Weather service there has been little to no rain in the majority of the Dakota’s, Minnesota, Nebraska, Northwest Iowa and Missouri states. The drought monitor showed 86.3% of Nebraska was facing drought conditions as of 6th September. A key producing state Iowa was at 40%.

• Ethanol production rose to its highest level in over a month. The EIA reported output of the biofuel increased to an average of 989,000 barrels per day. U.S. ethanol demand increases due to high gas prices and enhanced ethanol allowances.

• In Europe, France reported their corn harvest is now 5% complete as of the 5th September. The European commission estimates that corn production in the EU for 2022/23 will be 59.3 million mt which was down from 65.8 mmt in July.
• Drought has been a big issue gloablly, China has also been impacted. The country is currently suffering its worst drought on record as soaring temperatures cause parts of the Yangtze River to run dry. Officials are advising controls on water usage for agriculture. Drought has according to the water ministry impacted 2 million acres of farmland.
• According to CONAB Brazil’s 21/22 total corn crop is estimated to be 113.272 mmt down from 114.691 mmt. Exports were also reduced to 37 mmt.

Conclusion

The weather premium for U.S. market is firmly in place as yield expectations have been reduced. We may see further downgrades and reductions in both the U.S. and Europe if the adverse weather continues. The funds have been building back their long long position and have the potential to take this market much higher. The movement above key resistance levels would bolster this bullish tone.

Written by:

Harry Bennett

Harry Bennett

Harry started as a commodity consultant in November 2017, having previously worked for a wealth management firm in Hong Kong. Harry first entered the financial services sector upon graduating from his Civil Engineering degree in 2015. Whilst still early in his career, Harry’s passion and ambition to develop his knowledge within the sector are clear. Harry is currently studying all aspects of the commodity markets, and his spare time is spent on the golf course or socialising with family and friends.

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