Chicago Board of Trade Market News
Outlook: The USDA gave the corn market everything it could to induce a bullish rally. Last Friday, the USDA’s Planting Intentions report surprised the market by estimating 90 million acres of corn would be planted this year, nearly 1 million less than the average analyst’s estimate. Beyond forecasting tighter supplies, the USDA’s Grain Stocks report showed record-high corn demand during the first half of the 2016/17 marketing year. March 1 corn stocks were pegged at 8.62 billion bushels which, while higher than expected, implied 8.32 billion bushels of record-breaking corn consumption from the 2016/17 crop.
The USDA’s report was more bullish new-crop corn futures than old. The record-breaking demand apparent in USDA’s stocks report has been largely known for some time, as reported in the booming exports and ethanol use reports. Despite excellent demand, the prospect of huge South American supplies and large global stocks are limiting old-crop gains.
The acreage-induced new-crop corn rally provided a few days of excellent marketing opportunities but will likely not last long. While planted area was “only” 90 million acres, this figure still implies a 14.4-billion-bushel crop given trendline yields. If realized, this production would exceed USDA’s initial 2017/18 demand projection by 200 million bushels, hardly a bullish scenario. In the near-term, fund positioning (funds were short heading into the report and covered much of this position in the following days) and spring weather developments will have a more profound market impact.
Today’s Export Sales report was again bullish corn. The report identified 44.8 million bushels of old-crop corn sold last week, which was above the 15.6 million needed in this week’s report. Similarly, weekly exports of 62.9 million bushels were well above the 44.5 that was required to meet’s USDA’s demand projections. The report continues to highlight the competitiveness of U.S corn, which is now the cheapest in the world.
From a technical standpoint, May corn is still in a long-term uptrend but is under pressure from a short-term down trend. Friday’s post-report price action initially broke the short-term downtrend but subsequent trading has reconfirmed its presence. Today’s trading found support at the 10 and 20-day moving averages which could set up the contract for a test of the 40-day moving average at $3.76. The contract is neither over- nor undersold, giving little indication for corrective action one way or another. For now, the contract will essentially trade sideways until weather, commercial selling, or funds’ actions motivate other activity.