Chicago Board of Trade Market News
Outlook: Thursday’s WASDE report was bearish for the corn and broader grains markets. The report increased world corn ending stocks by 4 MMT from the USDA’s February estimate to 221 MMT. The USDA left U.S. production unchanged, but increased Argentina’s production 1 MMT to a record large 37.5 MMT. Moreover, the agency bumped Brazil’s production up to 91.5 MMT. The large, 5 MMT increase in Brazilian production came on the heels of larger-than-expected safrinha crop acreage and record-yield reports. Brazil’s exports were increased 3 MMT which could pressure U.S. exporters. Argentine exports were increased 1 MMT, implying the additional production will go straight to the international market.
For now, the USDA left U.S. balance sheet line items essentially unchanged – including U.S. exports. There were neither changes to planted or harvested acreage, nor to U.S. yields. In fact, all supply-side items were unchanged from the February WASDE. Small month-over-month reductions were noted in Feed and Residual (down 50 million bushels, or 1 percent) while corn for ethanol use was increased 50 million bushels to a record 5.4 billion bushels. Give the recent strength in ethanol production, this ethanol grind figure is likely still too low and further increases are likely. U.S. ending stocks and average farm price estimates were unchanged; USDA left U.S. wheat for feed unchanged and bumped up sorghum for feed/residual by 10 million bushels.
The latest export sales report from the USDA shows continued strong demand for U.S. corn. Weekly shipments of 57.3 million bushels were above the 46 million needed this week to reach USDA’s projection of 2.225 billion bushels for the 2016/17 marketing year. While export figures were strong, weekly sales figures were more neutral, with only 32.8 million bushels sold this week, 29.1 million from the current marketing year and 3.6 from the 2017/18 marketing year. Traders viewed the report as natural to bearish when it was released, but in light of today’s WASDE, the report has a more bearish tint.
The WASDE report added to the already mounting pressure on May corn futures. The contract retreated to its 200-day moving average soon after the report was released, found support at $3.67 ½, then traded and closed below this point. The contract has not closed below the 200-day moving average since December and today’s close will usher in a new downside target of $3.52, followed by $3.41. On the upside, should weather problems develop in South America or demand become exceptionally strong, $3.87 stands as the most logical bullish price target. Per last Friday’s CFTC report, money managers were still long corn but today’s news may limit their appetite for remaining long amid growing world stocks.