Good  Morning !The overnight CBOT trade has been mixed in another session of rather active volume. Lower prices were featured at the start of trading based on Thursday’s sharp price fall. With a recovery noted once the major weather forecasting models released their updates. The markets remain volatile amid changing weather forecasts. Thursday’s CBOT open interest data featured a 25 k contract decline in corn, a 12 k decline in soybeans, and a 3 k drop in Chicago wheat. This data confirms rumors that several large funds were exiting long CBOT positions

Certainly some damage has been done to chart patterns in the grain complex. And we can scotch the idea of recovering higher weekly closes after Thursday’s meltdown, however I would not give up on these markets yet. Next week they are still forecasting 4 plus days in the 90’s in the Iowa area before this area gets rain. The Corn Belt had better get the rain. The 6 to 10 day forecast has above normal temps for almost everybody in the Corn Belt and above normal precipitation for almost all of the Corn Belt with the exception of the Southern Corn Belt. This will be the critical rain for many corn farmers this summer would refer to these rain events as million dollar rains !This is one rain event that cannot be missed without causing trouble.

These markets rallied sharply to highs earlier this week on fund short covering motivated by hot dry forecasts The USDA re- confirmed that given estimated acreage that the balance sheets will remain well supplied with large carryouts. Crop yields are then the essential component to production and yields will need to come in below USDA baseline projections in order for carryovers to shrink. There is drought over a substantial portion of the Corn Belt. With a high pressure ridge moving around that has prevented a corn belt wide soaking rain needed to stabilize overall crop condition. Corn/soybean ratings should decline again Monday The forecast is still hot enough to cause crops some stress before these rains arrive. As noted these may well be the most important rains of the season for the corn crop.

corn chart

Stephen Davis

Stephen E. Davis is a 25-year+ veteran of the markets, who has been a retail broker with RJO Futures since 1998. He is a graduate of the University of St. Thomas in Minnesota and started as a runner at the Mid America Commodity Exchange in 1981. Davis' past experience involved working with firms Stotler Grain, O'Connor Grain, Dean Witter, R.J. O'Brien and Rosenthal Collins. His trading floor experience in agriculture and financial markets is the foundation of his brokerage approach. Throughout his career, he has worked with clients ranging from retail clients to some very large institutional clients. "My focus is on price and my philosophy is that chart patterns will show you where the big money is made," he says. In his time as a broker, he has seen an evolution of the trading process. "As all of these markets move from the trading floor to the computer screen, we are all like locals on the trading floor-and we do not have to pay millions of dollars for our memberships." His advisory experience includes CQG, Moore Research, Dennis Gartman (The Gartman Letter), The Hightower Report, Financial Times and the Wall Street Journal.