Crop conditions are holding across the country as the drought monitor showed a slight improvement this week. As chances of rain turn into reality for some farmers, the thought of expanding drought may be fading. Mark Gold of Top Third Ag Marketing says that doesn’t mean a weather market is out of the question this year.
“We make the corn crop in July, we don't make it in June,” says Gold. “I think we're on pace to have fairly normal pollination times on this. It looks like we're going to be hotter and a little drier the Fourth of July weekend, and I think it's going to be a critical weekend out here.”
Gold says he doesn’t think a potential weather market is over yet, as July can either make or break the crop.
“From all the years I've been trading, when we anticipate a huge crop, which we are certainly doing right now, we generally make the low sometimes in July,” says Gold. “Then, we rally because maybe we overestimated it, but we just have a tendency to jump. If we could do that, with the funds short 290,000 contracts of corn, we could certainly see a rally. Whether it's weather driven or whether it's just technical, that remains to be seen. I don't think the weather is quite over yet.”
Naomi Blohm, senior market advisor at Total Farm Marketing by Stewart-Peterson, says there’s still a chance for a weather market, but thinks the bigger factor next week may be USDA’s updated acreage report and a fresh look at stocks.
“The bigger picture at play, of course, is the acreage report on the 30th and the stocks report,” says Blohm. “If we can get some friendly news from the USDA from that, along with what Mark was saying for some drier weather potential as we head into pollination, that should be good for market bounce as we head into July. “
Blohm says one analog year to take into consideration is 2017 when the market drifted lower until the end of June, but then did a reversal in July.
“Back in 2017, the market kind of drifted lower until the end of June, but then between the June 30 report and heading into the July USDA report, corn actually had about a 40- to 45-cents bounce higher within two weeks,” she says. “As long as we can continue to hold the April lows, which we are testing right now, there is still some potential in this market.”
Blohm says one factor that could help the market is the funds’ short position in corn, which she thinks poses potential for the market to work higher.
“If the dollar can work lower, I do feel that prices can have a recovery bounce,” Blohm says. “We do need to keep an eye on the weather because depending on what the USDA tells us on Tuesday in terms of how many acres are planted, and where the quarterly stocks are, we might see that bigger 3-billion-bushel carryout number for the next year or things could be a totally different story.”
Blohm expects a tremendous amount of volatility with the corn market in the next two weeks. Gold thinks producers should set realistic expectations on how much volatility the corn market could see.
“Looking at a 3.3-billion-bushel crop, I don't think you want to get too crazy with it, but you can get a 30- to 40-cent rally in the corn and a 50- to 60-cent rally in the beans that might be a good place to start,” he says. “We still might make a new low here in the next week as we generally make our contract lows the first notice day. So, it’s possible in another week we make a new low. And hopefully that'll be the lowest here for quite some time if that happens.”
Heading into the acreage report next week, Blohm says the trade is expecting corn acres to fall to 95 million acres, which would be a 2-million-acre reduction from March. However, Gold thinks the corn acreage number won’t see as big of a drop, with acreage only falling by 1 million acres in USDA’s new acreage report on June 30. He thinks that 1 million acres will be switched to soybeans.