Chicago Board of Trade Market News
Outlook: Bears have won the directional battles for corn in recent days, except for Tuesday’s bullish pop. Prior to Tuesday, resolution of Argentina’s dryness and pre-holiday aversion to building positions left the market with a decidedly weaker tone. Tuesday’s trading, however, featured a 9 ¼ cent rally as a high-pressure ridge over Brazil implied hot, dry weather for the world’s second largest soybean producer. This, of course, sent soybean futures sharply higher and the corn market became caught up in the excitement. The current weather has little implication for Brazil’s corn crop but if it persists long enough it could impact the yet-to-be-planted safrinha crop. While the weather news is far more relevant for the soy markets, it was one of the few interesting news pieces uncovered this week.
Historically high ethanol production continued this week even though production figures slipped slightly from the week prior. Ethanol exports must have been solid in pre-Christmas trading as production, stocks, and gasoline supplied (a measure of ethanol consumption) all fell. The only factor that could have produced such an event is strong ethanol exports. U.S. ethanol exports are up 13 percent YTD on a value basis and up 21 percent on a volume basis. The strong ethanol program has been helpful for U.S. corn markets and USDA will likely raise their forecast of corn used in ethanol in the January WASDE.
March corn is miraculously still holding above the bullish trendline formed from the September 1 contract low and the intraday low on December 1. Pre-holiday trading briefly sent the contract below the trendline but Tuesday’s rally pulled prices above it once again. Funds are still short the contract but the Brazilian weather situation ushered in some short covering buying. At these prices, commercials are becoming opportunistic buyers and a pattern of buying price breaks is emerging. While it’s still tough to be “bullish” the corn market, there appears to be more upside potential than downside risk at this point.