Chicago Board of Trade Market News
Outlook: Corn markets have turned decidedly more bearish this week as commercial demand remains light in the December contract. Moreover, commercial selling was heavy earlier this week as firms sold off the remnants of last week’s rally. Despite commercial selling, however, no deliveries have been made against the December contract. The lack of deliveries thus far likely indicates the cash and futures markets are in balance, which is further evidenced by a 1-penny increase in the national average basis today. Ethanol production has continued to impress and exports have been stable the past two weeks, both of which have lent support to cash prices.
U.S. corn remains competitive on the global market with Gulf basis bids at +0.45H, which is cheaper than almost any other origin, including Argentina’s new-crop offers. A continued strong U.S. export program is needed to keep the market from collapsing under the weight of huge stocks. The market is doing what it needs to move corn across U.S. borders and into the hands of international consumers.
U.S. exports have been just sufficient to keep the market on track with where it needs to be. Export inspections totaled 800,000 MT (31.5 million bushels) this week and YTD totals stand at 185 percent of the prior year. Export sales this week were 39 million bushels which exceeded USDA’s projected pace of 26 million while reported exports were 31.8 million bushels, below the 43.6 million needed in this week’s report. Overall, the latest figures are neutral for corn and show that exporters are remaining competitive and moving product. However, the broader market remains vulnerable to any export slowdown.
Technical conditions for December corn futures are deteriorating quickly. The contract, now roughly two weeks away from expiration, has fully broken below the uptrend that began at the end of August. Moving averages (10, 20, and 40-day) are showing bearish trends in both the December and March contracts while momentum indicators are flashing sell signals. The implication of all this is that last week’s rally is over and fresh news will be needed to lift markets out of their doldrums.
The break at the CBOT is likely to reduce farmer selling and have a modest tightening impact on the cash market. Furthermore, it will lower elevation costs for exporters and, combined with today’s lower U.S. Dollar Index, will likely spur additional exports. Overall, the outlook for corn futures is decidedly sideways. Prices likely won’t test harvest lows but the market lacks any news to move much higher. For now, exports, ethanol, and farmer selling will determine the direction of corn prices.