Evening Corn: Quietly higher to start the week; spreads dominated volume
A new week, and more of the same choppy and disinterested trade in the corn market. Despite the conclusion of the Goldman Roll late last week, the K/N roll continued to dominate volume, easily accounting for half to two-thirds of total May and July trade. Outright, futures managed to close two cents higher today, going out pretty much where it started the morning. Managed Money traders were viewed small net buyers, but are still believed to hold a record short position in corn, likely to the tune of about 285,000 combined futures and options. Cash trade was mostly steady, though summer Gulf slots were slightly weaker.
On the weather front, other than a few showers, the radars were blessedly clear this morning after last week's big storms. Unfortunately, the storm left plenty of snow across the upper Midwest, which will take some time to melt, and there is more precip heading that way later this week. Maps still suggest a drying period thereafter, with the best shot at some wider fieldwork seen into the first ten days of May, according to World Weather. If those forecasts do not verify later, look for the currently "sleepy" market reaction to get much more dynamic? The national corn planting update tonight confirmed a sluggish start; just 3% of the U.S. crop was seen planted, which compares to 5% average. Should see a little progress in portions of the Southwestern Belt (N MO, parts of KS, parts of S IA) next week? Not enough to come anywhere close to average?
Mid-day grain inspections were decent for a second week in corn. For the week ended 4/11, U.S. exporters shipped 1.18 million metric tons (mmt) of corn, which was up from last week's 1.06 mmt, but still lagged the year ago week's 1.58 mmt. This takes YTD corn shipments to 31.9 mmt, which compares to 28.1 mmt this time last year. Exporters need to ship about 1.4 mmt each week going forward to meet current USDA export projections. Not impossible, but very difficult given the relative dominance of South American sellers in summer slots on forward.
Elsewhere, livestock markets featured a "quietly higher" start to the week. Ditto ethanol, which is benefitting from a combination of unscheduled plant downtime and a sharp rally in Brazilian ethanol values late last week. The crush was little changed today at levels that imply slightly positive margins for nearly all Midwest ethanol plants. Trade negotiations are a dime a dozen at this point; China obviously the big fish, but EU, Japan, and Canada/Mexico also simmering in the background. Treasury Sec Mnuchin was out "bad-copping" the China talks, downplaying recent progress and saying more issues were needing to be worked out, namely enforcement. Still no story in South America; a little dryer than desired overall, but yield potentials are still quite strong in both Argentina and Brazil. Reminder; it's a short week, with markets closed Friday for holiday.
In the options pit, corn volatility was a little softer up-front, but a little better for summer and new crop months. Trade was most active in June and July 10-20 cent wide call spreads. One house paid 5 7/8 for 500 july 390 calls covered vs 372 futures. Calendar spreads were a little firmer between crop years. K//N roll traded over 110,000 times Monday. Corn was even on the beans, but gained on the wheat. Technically, May Corn has established the $3.55 CK area as very strong support and the spot to beat to generate more bear momentum. Initial resistance stands just below $3.70. Weekly indicators lean negative, but the daily chart would flip back to positive with a better close tomorrow (Tues).
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