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(August 14, 1997) CORN: It has been an interesting season this year as market perspectives and trader emotions have swung from one extreme to the other. This week was another example in which the USDA dumped a bullish report into the laps of market bears. The USDA pegged corn production at 9.276 B.B. which was 275 M.B. below trade estimates and 475 M.B. below the July report. This came as the result of yield being reduced from 131.0 BPA to 125.3 BPA. Ending stocks were lowered to 847 M.B. which is nearly 100 M.B. below the 1996-97 crop year. The report caught traders completely off guard and resulted in a limit up move on Tuesday. Global production was also reduced 23 million metric tons to 572 million metric tons which resulted in a 17-million- metric-ton decline in ending stocks to 70 million metric tons. This report virtually threw any hopes of a record crop by bearish traders completely out of the window! China's crop was lowered by 12 million metric tons to 122 million metric tons which clearly suggests that they will be major buyers of corn this season. Adding insult to injury, bearish traders had to face another decline in crop conditions last week. Fifty-eight percent of the crop was reported in the good-to-excellent category compared to 66 percent the previous week. However, beneficial rainfall in the Corn Belt this week should improve next week's crop ratings. Twenty-eight percent of the crop is in the dough stage which is in line with the 5-year average. Export inspections were above expectations at 36.4 M.B. but old-crop sales showed a net reduction of 23,800 metric tons due to cancellations. New-crop sales were disappointing at 160,100 metric tons. December corn rallied to challenge last week's high at 274 but was unable to trade above it. As it looks now, the market is probably in a flat correction from this high. and unless it is exceeded, the odds favor a decline to 261. 258, or 255. Seasonally, the market is due to move lower until the end of August. Trend changes are due on August 19th, 20th, or 21st which would be a good time for a bottom if prices are lower. A more significant bottom is due near the end of September, but it is highly probable that the correction from 274 will have ended before then. A rally above 274 will turn the long-term outlook bullish and focus on a rally to 310 or higher. A decline below 243 is needed to turn the outlook more negative. Longer term, the March and May contracts have the potential for an advance to 320 or 360. Timewise, a long-term top is not due until the week of December 5th and probably closer to the week of March 6th or 27th, 1998.
Dewey Strickler
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