CBOT weekly outlook: Corn, soy likely to decline in wake of USDA reports

(Lisa Guenther photo)

CNS Canada — Corn and soybean markets at the Chicago Board of Trade moved to fresh highs on the week, gaining alongside mounting weather concerns, but one U.S. analyst says the rally could be limited.

Soybeans — “It’s just completely insane, but we’ll see what the (U.S. Department of Agriculture) has to say,” said Sean Lusk of Chicago-based Walsh Trading.

Soybeans moved close to a two-year high on Wednesday and have seen tremendous gains on the week, adding 78.5 cents per bushel in the July contract, and 77.5 cents per bushel in the November contract (all figures US$).

But Lusk doesn’t expect those advances to hold short-term, especially with upcoming reports from USDA.

World agricultural supply and demand estimates (WASDE) come out on Friday, while a grain stocks report is set to be released at the end of the month.

If there are no major surprises on those reports, the soybean market is likely to take some of its recent gains back, Lusk said.

“I think they’re going to give it up; they’re getting grossly overbought from a technical perspective,” he said.

Despite the potential for pressure from that report, the market still has a significant amount of bullish news to keep support long-term, as traders focus on the expectation for less-than-favourable weather into the summer.

The U.S. is expected to see hot, dry conditions, which could hurt crop potential, while competing growing regions face La Nina, a cooling of the central and eastern tropical Pacific, which could interrupt typical weather patterns.

“We just keep making new highs; there’s a lot of fear in the market,” Lusk said.

“Until we know what this crop is, how much is grown, the surge continues to the upside.”

Corn — The idea that farmers have switched acres from corn to soybeans due to dry weather in parts of North Dakota, Indiana and Ohio is keeping support in the market.

“Corn is simply following, trading up to the next resistance level,” Lusk said.

But like soybeans, if upcoming USDA reports offer no surprises and are neutral, corn prices are likely to take a hit.

Since last week corn has gained 17.5 cents per bushel in the July contract, and 19.75 cents per bushel in the November contract.

— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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