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After a cold, soggy start to the season, it’s finally feeling like summer in the Midwest, and corn fields are recovering.
A turn toward warmer weather should be beneficial for the battered crop, and government data signal that conditions are starting to bottom out. The changing weather also means that investors are tapping the brakes on their bullish bets after prices took a spectacular ride higher.
Key growing areas are likely to stay warmer and drier this week, helping the crop catch up to normal growing stages after the heavy rains caused record planting delays. Corn’s rally has started to cool off after futures in the second quarter surged 21%, the best such performance since 2014.
U.S. crop ratings rose by 1 percentage point to 57% good or excellent, the Department of Agriculture said July 8, matching expectations from analysts surveyed by Bloomberg.
Meanwhile, money managers are feeling less positive on the market. In the week ended July 2, the investors’ net-long position dropped 3.3% to 181,648 futures and options, according to U.S. Commodity Futures Trading Commission data. The figure, which measures the difference between bets on a price increase and wagers on a decline, was the first loss in seven weeks.
Short-only holdings jumped 7.3%, the most since April.
Corn prices tend to fade seasonally at this time of year as the North American harvest approaches. Some traders may be cutting their longs until more information is known about the size of the crop, said Brian Hoops, senior market analyst at Midwest Market Solutions in Springfield, Mo.
USDA will release a monthly supply and demand report July 11. Analysts expect the agency to trim its outlook for domestic corn and soy production. However, USDA also is conducting an additional survey this month on plantings — those results won’t be published until Aug. 12.
“Historically, they don’t want to be long after the Fourth,” Hoops said of fund corn positions after the July 4 holiday.
“The caveat is we don’t know what the planted acres are,” he said. Estimates are coming in at a “wide range.” The final figure “could really influence our ending stocks and, in turn, our prices,” Hoops said.