Grain Spreads:March 20/Dec20 Corn

Trade deal drama, impeachment inquiries, and a NATO summit dominate the national headlines to start December. In the Midwest, corn harvest continues to plod along. This afternoons data showed 89 percent of the corn crop harvested vs a five year average of 98 percent. Problems continue to plague the Northern Plains and Great Lakes areas. North Dakota is at just 36 percent harvested, South Dakota at 80. Wisconsin and Michigan at 66 percent. There are other laggards as well in the Midwest as snow cover, high wind, sleet and rain continue to plague the Midwest. Its been a known in the market and the delays haven't caused any frantic short covering in the market by index and trend following funds. While there is a crop report next Tuesday by the USDA, the monthly supply demand at 11 AM, NASS will not be offering some of their end of year data until the January report. Therefore I'm not sure what surprises maybe in store here next Tuesday. Regardless demand figures have seen a light recent lately but still remain soft. Sales last week showed 806,800 tonnes sold for future shipment vs expectations of anywhere between 400 to 900 K. Cumulative sales have reached just 29.9 percent for 19/20 crop versus a 5 year average of 44.5 percent. Sales need to to average 809 tonnes per week to meet the USDA forecast. To turn bullish we need to see sales at 1 to 1.2 million at least per week, given that its harvest and South American supplies once ample, have dwindled as they have captured the majority of global business from late Spring through half of November. Dose the demand window shift to the US? Are last Wednesdays bottom in corn at 373.0, the bottom into the USDA report in January?

Above is the March 20/Dec 20 Corn futures spread. It settled at 9.2 cents March 20 under (carry). Near term high is 0.6 cents March 20 higher, the low is 17.6 cents March 20 under. Today's settle is approx half way back. If corn breaks out to the upside, this spread can trade inverted up to 11 cents March over in my opinion. Better demand, lower US production due to any late harvest losses, and suspect SA weather may prod the funds who sit with over a 100 K short to cover. There have been few deliveries so far, producers maybe sitting on supply awaiting higher prices. A close under 18 cents under, and we could retest Spring lows at 31 cents under. This is not a bad spread for producers as they are able to lock in 395 Dec 20 corn next year for a percentage hedge, while at the same time doubling down for higher prices near term being long the March.

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