Although a wetter pattern has started to emerge in parts of the U.S. corn belt, traders say that significant damage to the crop is already done, and add that above-average temperatures are expected next week.
Traders are "still nervous over the 'what ifs' in this market, and want risk premium in place, which is giving us support," Karl Setzer, an analyst with MaxYield Cooperative in West Bend, Iowa.
Cooler temperatures the next few days will ease stress on crops in the Midwest, but "rainfall associated with the cold front that brought this cooler weather as been disappointing in many areas," Telvent DTN meteorologist Joel Burgio said in a Friday forecast.
Burgio added that a return to the recent extreme heat is not expected over the next five days, but that there could be a brief period of "very hot" weather after that. The drought is likely to persist through at least the next 10 days, he said.
The weekly U.S. Drought Monitor on Thursday reported that 17.2% of the country was in extreme drought or worse, up from 11.3% the prior week. More than half the country is in at least moderate drought.
But some traders and analysts think the market has established a top. September corn is down from a July 20 peak of $8.28 3/4.
Traders who see downside to the market think that this year's poor crop has already been priced in, and that the historically high prices have choked off demand.
Prime Ag Consultants analyst Paul Beere attributed Friday's gains to nothing more than a bounce from previous losses this week. The "area of concern" for this year's corn crop is shrinking, he said.
"At the end of the day I'd rather be short than long going into the weekend," he said.
Beere added that premiums for December call options fell substantially on Thursday, which is a sign that market sentiment is shifting. Calls give buyers the right, but not the obligation, to buy corn at a certain price, even if futures surge above that level.
Corn for September delivery at the Chicago Board of Trade was recently up 12 1/2 cents, or 1.6%, to $7.93 3/4 a bushel, while December corn was up 10 1/4 cents to $7.86 1/2.
