Chicago Board of Trade Market News
Outlook: Exports are essentially the only remaining piece of the 2016/17 corn supply and demand puzzle. With only 15 weeks remaining in the marketing year, ethanol production offers little opportunity to influence corn use, though USDA is generally expected to increase the corn for ethanol number in coming reports. Livestock feed demand is well known at this point and few surprises can exist between now and the new crop to substantially change the demand picture. The remaining demand variable, then, is exports.
Exports have been performing exceptionally well this spring. This week’s report showed 27.8 million bushels in net sales and 60.8 million in exports. Both were above their respective targets of 10.2 and 43 million bushels that were needed to reach USDA’s projections. YTD corn exports are up 47 percent while YTD bookings (exports plus unshipped sales) are up 31 percent. After river flooding slowed exports two weeks ago, the return of normal weather has allowed for more barge activity and better exports.
The U.S. export program is facing increasing challenges, however. FOB NOLA prices are now at parity with FOB Paranagua (Brazil) prices and are only a few cents below Argentina. Today’s news from Brazil that sent the real down 8 percent at one point will likely increase Brazilian farmer selling rates (though not as much as with soybeans) which will pressure U.S. export opportunities. The dollar’s week-long slide has more than helped the U.S. export program but it’s turnaround today may limit future export options.
Funds have amassed their largest short position since March 2016 and today’s soybean selling likely added to this figure. Commercials are buying cheap corn aggressively, which is limiting further losses. U.S. basis levels are increasing, a sign that commercial buying is slowly taking hold.
From a technical perspective, corn is range bound; trading between a ceiling of $3.75 and a floor of $3.64. All technical indicators are essentially neutral with moving average slopes near zero and the RSI almost perfectly neutral at 48. At this point, it will take a dramatic shift in old-crop fundamentals to break July corn out of its range bound malaise. It seems July corn is destined for more sideways price action, given that exports are the only remaining demand variable.