The weakness in corn after the holiday weekend resulted in the December contract gapping lower and only worsened from there. On Wednesday the market reached our bear target and made new contract lows each day since (see chart below). The lows that are being traded have not been seen since 2010 as fund liquidation is being seen in large quantities and weather conditions remain favorable for pollination.
Crop conditions are currently rated 75% good to excellent, which is the fifth best we have seen in the past 25 years. Weekly export inspections came in below the average weekly pace needed to obtain the U.S. Department of Agriculture’s projection for the year but were higher than analysts’ expectations. The USDA reported 1,080,525million tons (42.5 million bushels), up from last week’s 886,949 million tons and five times larger than what was seen this time last year.
Easily brushed off mid-week was the USDA report showing 209,296 tons of U.S. corn sold to Japan and to an unknown destination. Export sales were a mixed bag with old crop sales topping expectations and new crop showing smaller sales than what was anticipated; 363,000 million tons of old and 381,600 million tons of 2014-15 crop.
Rumors of a delayed harvest in South America and a stressed crop in China has done nothing to prevent falling prices as supplies will remain plentiful regardless. As mentioned earlier, the U.S. crop is expected to flourish throughout the pollination period. At this point, the only hope for the bulls is confirmation of flooded fields in the areas of the Corn Belt but even then we will probably just see temporary bounces.
Unfortunately, current prices are on pace to result in the lowest earning levels for corn producers in the past five years as this losing streak continues. Conab raised the 2013-14 Brazilian crop production estimate to 78.2 million tons from 77.89, adding more kindling to the bear fire. It’s worrisome to come to the realization that if we continue seeing this enthusiastic weather, corn could fall as low as $3.20 per bu.; in 2013. Prices slipped from July all the way to November, losing more than $3 from the July high to November’s low.