U.S. corn futures in May had their largest one-month selloff since last September as worries surrounding Euro debt fears and the resulting global economic slowdown continue to escalate, according to a Doane Advisory Services report.  The Chicago Mercentile Exchange July contract closed Thursday at $5.57, down about 15 percent for May.  “There has been a large amount of fund liquidation driving the decline in the old-crop July contract that has led the selloff,” according to Marty Foreman, Doane senior economist.

“In addition, weakness in the financial markets tied to the Euro zone debt crisis, with the focus now on Spain, has contributed to the selling pressure in the commodity markets generally. Prospects for a favorable outcome to the debt crisis are eroding.  The crisis could slow world economies thereby hindering U.S. corn demand. As a result, exports for corn seems to be slipping. It appears that export demand has eased with importers shifting buying interest to South America,” Foreman said.

Much of the southern and eastern Midwest is short on soil moisture, however, leaving the possibility that bears may have to give up control of corn prices they have wielded for most of May. “While some scattered showers have helped, they will not recharge soil moisture, which will leave it vulnerable to another period of heat and dryness,” says Foreman.  Extended forecasts call for above normal temperatures and below normal precipitation for much of the Corn Belt. “If that happens, the corn crop is at risk and prices could quickly bounce back,” adds Foreman.

In a related corn crop report, Emerson Nafziger, University of Illinois crop sciences professor, answered the question of the relationship between early crop development and whether stress at that stage will reduce final yield potential even if rainfall returns to normal levels.  “The short answer is no.  We have no evidence that a corn plant that undergoes moderate water stress during the first half of vegetative growth, say, through V10 or so, suffers irreversible loss of potential kernel number or size,” Nafziger said.    “On balance, the warm, dry weather in Illinois has been favorable, and we do not believe that there has been any substantial loss of yield potential in most areas up to now,” he concluded.

Nafziger, did,  however, note that some of the crop has not been able to establish a good root system yet and remains under stress. “When we reach the point where current soil water supplies will no longer provide water at rates high enough to sustain maximum growth rates, the need for rainfall will become more urgent.”

 

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