Chicago Board of Trade Market News
Outlook: Corn has been experiencing an impressive rally, in part due to the improved export sales pace and troubles with Brazil’s winter crop. Still, one would expect some exiting of positions ahead of the three-day long market break for this weekend’s U.S. Memorial Day holiday.
The fact that corn plantings are roughly at the five-year average is considered bullish by some, especially when adding in some forecasts for a droughty U.S. Corn Belt due to the departure of the El Nino pattern. Add to that some cool dampness in states like Ohio and Indiana that have slowed planting there. At the same time the rally has spurred thoughts that higher prices will encourage more corn to get planted. U.S. export sales of corn continue to be positive and may require USDA to adjust slightly upward the estimated marketing year total.
The harvest remains slow in Argentina as soybeans are receiving the attention of the machinery. China’s feed demand has been robust at the same time there are reported quality problems with government grain stocks – all of which has kept the domestic corn price from declining. If China has trouble consuming its own product, it will increase the challenge of achieving its goal of overall supply destruction. Corn planting in Eastern Europe has gone well and larger crops are expected this year. However, the lack of near-term farmer selling has enabled an unusual large sale of French corn to Egypt.
The International Grains Council (IGC) raised its forecast for world corn production, part of which is occurring in countries that traditionally import corn, and this will limit any growth in the actual volume of exports. Note that a relatively small share of world corn is actually traded and, because of the radius of the demand curve, the ebb and flow of exports has an outsized impact on corn prices. Moreover, what is traded has to compete with abundant wheat being sold as feed.