Grain Spreads: Funds Flip Short in Corn

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Commentary

Corn continues to search for a near-term bottom as price action pushed lower again this week and tested contract lows. Funds have flipped to a net short position for the first time in many months as CFTC reports that they are short 5K futures and options contracts. Generally favorable growing conditions, with isolated issues of excess rain leading to replanting, have also worked to push markets into a lower trading range. Demand for corn is still robust with export sales this week rising from last week to 1.04 MMT, ethanol production remained flat from week-ago levels at 1.088 million barrels per day. USDA’s June WASDE crop report is known for being a yawner and this one didn’t disappoint. USDA “found” another roughly 14 million metric tons of global corn production for the current marketing year in yesterday’s report. That’s more than a half-billion-bushel increase in one report. USDA increased the size of Brazil’s crop by another 3 million metric tons (mmt) on Thursday, while adding 2 mmt to Argentina’s crop, and India’s crop was increased by nearly 9 mmt. Global demand was increased to absorb better than half of the increased output, pushing current year ending stocks upward by 6.4 mmt. Weather rules and the current trend of cooler and wetter give thoughts to an El Nino that is already present. Staying on the sidelines for now with trade recs to see if any changes in the weather outlook that may emerge. 

Trade Ideas-N/A

Risk/Reward-N/A

Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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