Corn Market Analysis: Weather Dictates July Outlook After Rough June

The end of June was rough for corn market bulls. Even though we know the market has been in a long-term downtrend since the end of May 2022, the fact the December 2024 futures extended its downward move to a low of $4.13 before closing at $4.2075 to end the month was tough for many to watch. 

If we want to look for a bullish needle in what seems to be a bearish haystack the size of Iowa, the fact Dec 24 closed back above the round number $4.20 might provide a little solace. Until the market gets rolling in July, that is.

Speaking of July, the U.S. 2024 crop is not out of the woods yet, meaning the next few weeks will likely be driven by weather. This makes sense given corn, like the other ag production markets, is a weather derivative at heart. 

That being said, July often proves to be a difficult month for December corn. 

What do I mean by that? A long time ago in a galaxy far, far away — actually about 40 years ago out in the middle of nowhere Kansas, where I was dumping wheat trucks for the local cooperative — I started thinking about how markets moved over the course of a year. Generally speaking, markets would rally during planting season, then sell off again as the U.S. moved into harvest. As I did more studying and started to refine my analysis, I could best explain seasonal analysis by saying it was a hybrid between fundamental (based on all factors affecting supply and demand) and technical (chart based). I’ll go into these other avenues of analysis as time goes on but, suffice to say, agriculture in general gets them wrong. 

The end of June was a classic case of that, as members of the BRACE (brokers/reporters/analysts/commentators/economists) industry misled the populace at large with all the caterwauling about USDA’s quarterly Grain Stocks and Acreage numbers. For the record, I’ve been a broker, worked in a newsroom for more than a decade, analyst for nearly 40 years, a commentator for most of that time, but never an economist (a fact I’m infinitely proud of). 

My brand of seasonal analysis looks at average weekly closes over the course of 12 months, either a calendar year (energies), marketing year (grains) and contract year (livestock). 

Where most of the seasonal analysis industry looks at average prices over time, I use those average weekly closes to build indexes that tell me what the average percent of moves are over the course of the year. I do this because prices change over time. Think about corn: prior to the Renewable Fuels Act of 2005, the range was roughly $2.00 to $3.00; after the introduction of increased ethanol demand, the range raised to about $3.00 to approximately $4.50. And, along the way, the market saw an initial spike to near $8.00, just for the fun of it. Using average prices can lead to flat seasonal patterns as opposed one where we can see clearer waves. 

The other important feature of seasonal analysis is that it should be used as a guide — something that shows us what tends to happen as opposed to something that will happen. In fact, it’s when a contra-seasonal trend develops that things get interesting, as it indicates fundamentals have changed from what is normally seen. Lastly, seasonal studies reflect the normal ebb and flow of supply and demand over the course of a year, reflected in trends of weekly closes only. Again, the hybrid of fundamental and technical analysis. 

A look at my seasonal studies shows the December corn futures contract tends to drop 12% from late June through late August (five-year index) to 13% from late June to early September (10-year index). This includes losses of 6% during July, fittingly enough. 

Given December 2024’s June close, the contract could be sitting near $3.95 when July comes to an end. If weather remains favorable for the U.S. Plains and Midwest, the drop could be a bit more. On the other hand, if rains don’t materialize and the dryness registered across the Midwest on the last couple U.S. Drought Monitor maps continues to expand, then December 2024 would be expected to lose less than its average moves. 

It’s interesting to note that new-crop corn futures spreads are neutral, though we did see increased commercial selling into the end of the month. The December 2024-July 2025 finished June covering 41% calculated full commercial carry, with 33% or less considered bullish. But again, that’s a topic for another day, but it has to do with understanding REAL market fundamentals as opposed to USDA’s imaginary kind. 

The calendar page has now turned to July, and we are talking about the corn market and the crop standing in the field, so naturally the “juke box” in my mind starts playing a song from “Oklahoma” that includes the line, “ ... the corn is as high as an elephant’s eye ... ”.

I don’t know about that, for I have no elephant to use as a measuring device, but I have heard from folks out standing in their fields that the crop looks good. As long as this remains the case, we can expect the December 2024 corn contract to stay in its seasonal pattern during July and beyond. 

Until next time, 

Darin Newsom

About the Author

Darin Newsom has been working with markets in general for nearly 40 years, dating back to Black Monday 1987. Over that time, he has worked in local grain elevators, first dumping trucks then as a merchandiser, before becoming a commodity broker and advisor. That eventually led him to DTN where he spent 15 years as the company’s senior market analyst before going out on his own with Darin Newsom Analysis, Inc. 

These days, he also has the title of Senior Analyst for Barchart. Along the way, he has developed his own way of analyzing markets in every sector, always proudly reminding people that
he is not an economist.