Chicago Board of Trade Market News
Outlook: Monday’s WASDE report from the USDA confirmed the market’s expectations: a lot of corn will be harvested this fall. The September WASDE did offer some surprises as USDA’s trimming of corn yields and production was less than expected. USDA’s estimated national average yield was 174.4 bushels per acre, giving way to production of 15.09 billion bushels. Despite reductions from the previous WASDE, USDA’s latest production estimates are 11 percent higher than the 2015/16 crop year. Corn use in feed rations was reduced 25 million bushels from last month as cheap feed wheat is aggressively competing against corn for inclusions in livestock rations. However, feed use of corn will still be 9 percent higher than the previous crop year. Notably, USDA kept export forecasts unchanged from last month at 2.175 billion bushels which would be the highest corn export number since 2007/08. The 14 percent year-over-year increase in corn exports generated a 1 percent reduction in ending stocks for the new crop. Ending stocks were estimated at 2.384 billion bushels which was 62 million higher that pre-report expectations.
Interesting adjustments were made for other countries in the WASDE as well. While USDA left the global corn crop unchanged at 1.028 billion MT, China’s production was reduced nearly 1 percent while Brazil’s production was increased 3 percent to 82.5 MMT as favorable prices in the southern region will favor first-crop corn over soybeans. Brazil’s export forecast for the coming crop year was raised due to the production increase. Finally, USDA left global corn ending stocks unchanged at 219.4 MMT which still suggests there is more than ample corn for the world’s needs.
U.S. corn export sales for the week were at the lower end of the forecast range, coming in at a total of 724,600 MT with 703,500 MT of that from new crop sales. The weekly sales were below the pace needed (746,100) to reach USDA’s 2016/17 demand forecast of 2.175 billion bushels. However, weekly shipments of 1.128 MMT were above the level required for this week’s report. Overall, the market is likely to view today’s export figures as neutral.
December corn futures remain lodged in a bearish down trend but are trying to form a seasonal bottom. Following Tuesday’s WASDE-induced selloff, futures have stabilized and have failed to close below key chart resistance at $3.26. The December contract seems to have formed a “V” bottom from the August 31 contract low ($3.14 ¾) which stands as strong support going forward. The market is no longer technically oversold and will likely trade within a corrective range between $3.14 ¾ and the major resistance at $3.46. A close above the 20-day moving average would open up $3.46 as a target and a close above this target would be needed to usher in significant buying strength. Notably, commercials are adding to their long positions, highlighting the value of corn at these prices. Commercials seem to indicate some cash buying interest as the national cash price index moved up 1 cent to $2.91 per bushel, even as the national average basis weakened 1 penny to 40 cents under December futures.