A Large Crop Gets Larger?
It appears that U.S. Corn producers did their job to help supply the insatiable appetite for the crop this year thanks in large part to rising demand for Corn-based Ethanol and livestock feed. The USDA’s August crop production report estimated the U.S. Corn crop at a whopping 13.054 billion bushels, but many observers believe the crop will be even larger. Professional Farmers of America came out with its own Corn crop estimate last week, estimating the U.S. crop at 13.109 billion bushels, or 0.4% above the USDA estimate. Early harvest reports from the southern Corn Belt showed better-than-expected yields, which also support higher crop estimates. 59% of the U.S. Corn crop was rated good-to-excellent last week, up 1% from the week before and 2% above conditions last year at this time. This news has kept Corn prices in check, with current prices nearly 90 cents below the mid-June contract highs of $4.35. Not all the news is bearish, however, as analysts expect Corn production from the northeast growing region of China to decline by about 6 million tons this year as drought conditions pare yields. Analysts look for China’s total Corn production to decline by between 1 and 2% this year. Traders should expect choppy trade in Corn futures until the next USDA crop production report on September 12th.
Looking at the daily chart for December Corn, we notice prices hovering below the major moving averages. Momentum as measured by the 14-day RSI has turned lower with a reading of 40.11. Last week’s high of $3.70 may have confirmed a double top formation, along with the July 13th highs of $3.71. This area will be formidable resistance for the December contract, and a test of support in the $3.24 to $3.26 area is not out of the question. At the end of the overnight session, December Corn was trading at $3.44 ¼, down ½ cent.
Mike Zarembski, Senior Commodity Analyst
