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(August 14, 1997) CORN: The December corn market appears to be taking leadership over the grain complex. As I see it there are three principle reasons why this is occurring.
First...This week's USDA report showed a surprising reduction in estimated U.S. production at 9.276 bill./bu. down from last month's estimate of 9.7 bill./bu.
Second...China's estimated production was downsized significantly from 122 million tons down to 110 million. Dry conditions are still forecast for that region.
Third...Crop conditions in the Midwest have deteriorated over the last four weeks in a row.
With a potentially smaller crop here in the U.S. and in China, world stocks of corn could become much smaller than previously estimated. The potential of a weaker U.S. Dollar could help spur more U.S. exports of corn and this could lead to what I see as a demand driven market.
Overall, weather conditions have improved dramatically over the Corn Belt in the last few days, but it appears to me that recent rains have benefitted soybeans more than corn and that damage done during July's pollination period could effect yields.
RECOMMENDATION–I would recommend you play the long side of the corn market. In my opinion breaks in this market should be bought, looking for a challenge of $2.75. A close above this level could project the market up to $3.00. A strong technical picture appears in place and I would be surprised if the market closes below $2.50.
Boyd Baker
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