Chicago Board of Trade Market News
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Outlook: The USDA surprised the corn market today by announcing that – nothing is changing. Traders had been expecting changes in Brazilian and Argentinian production but both the U.S. and international supply and demand situations were left essentially unchanged. The U.S. corn balance sheet was the same as the January report except for a minor adjustment to Food, Seed, and Industrial (up 35 million bushels, 25 million of which was from ethanol) and ending stocks (down 35 million bushels). The U.S. ending stocks to use ratio was lowered 0.2 percent to 15.9 percent while the annual average farm price was unchanged at $3.40/bushel.
Of more interest was the USDA’s decision to leave Brazilian and Argentinian production figures unchanged. For traders anticipating either a bearish increase in Brazilian production or a bullish cut to Argentina’s crop, today’s report was disappointing. The decision to leave unchanged (or at least postpone changes to) South American production does leave open opportunities for the USDA to make larger revisions in the March report. Interestingly, USDA did lower the global ending stocks figure for corn, citing higher corn use in China and a draw-down in the EU’s ending stocks. Global ending stocks are now projected at 217.56 MMT, down from January’s 220.98 MMT projection.
The price action of the March corn contract has been interesting this week. Ever-increasing moving averages are supporting the market, which broke a 6-month high Thursday before the WASDE report. The WASDE’s implications for the corn market were neutral-to-bearish but corn finished the day only 1.25 cents lower. The higher close was largely the result of large intra-commodity spreads (long soybeans and short corn or wheat) being unwound as the WASDE was more bearish for soybeans. Funds are still long the corn market and today’s report offers little reason to change their positions. It’s worth noting the December 2017 corn contract closed at $3.95 ¾ today, which may provide some attractive hedging opportunities for farmers.