Chicago Board of Trade Market News
Outlook: The corn market has been trading without substantial new news for some time now; stuck continually evaluating the story of large South American supplies versus big demand for U.S. exports. The weather is almost ideal for the corn harvest in Argentina right now and the Buenos Aires Grain Exchange reported 10 percent of the nation’s corn was harvested as of last week. Given this week’s favorable weather, Argentine farmers should be able to make a substantial leap in progress – perhaps hitting 17 percent completion or higher. South American traders are reporting a steady and impressive flow of trucks to ports, and some are thinking the limiting factor for Argentina’s exports this year may be the number of trucks available to transport grain. The start of Argentina’s harvest is bringing commensurate pressure to corn prices, and FOB Upriver prices are under $160/MT for the first time since early February.
In Brazil, the weather is looking good for the safrinha corn crop. Some analysts are expecting further upward revisions to Brazil’s production figure (currently at 91.5 MMT) though most agree current estimates are on the high side and leave little room for improvement. So far, global corn buyers have not sourced significantly from Brazil, waiting until the summer when Brazil’s exports will pressure the market. Moreover, U.S. Gulf prices are maintaining a strong advantage against any other competitor. Currently, spot FOB prices are 13 cents cheaper in NOLA than in Paranagua and U.S. Gulf prices are 9 cents less than Argentina’s Upriver offers. The U.S. should be able to maintain its competitive position for some time to come which will help clear some of the large U.S. stocks.
The USDA’s weekly export sales report was bullish corn as both weekly sales and weekly shipments were more than was needed to meet USDA’s projections. Net sales came in at 58 million bushels with 53 million for the current marketing year, far more than the 17.5 million needed in this week’s report. Similarly, weekly shipments of 54.4 million bushels exceeded the 45.2 million needed to reach USDA’s export projections of 2.225 billion bushels.
From a technical standpoint, May corn is lodged in a bearish down trend and is slowly grinding toward support at $3.52, the December 23, 2016 daily low. That daily low roughly corresponds with the 61 percent retracement level in the rally that lasted from August 31, 2016 to February 6, 2017. Should this support level withstand the coming selling pressure, it would open up a return to the $3.60 trading range with resistance at $3.64 and then $3.70. On the other hand, however, if bears push prices below the retracement point, May corn would become vulnerable to a 100 percent retracement down to $3.32 ½. As everyone watching the market knows, this battle will be decided somewhere between big South American supplies and growing global corn demand.