Chicago Board of Trade Market News
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Outlook: Despite record supplies, the corn market is clearly demand-driven right now. Exports have been more than robust and with the U.S. livestock sector expanding, the opportunity for increased feed demand is not lost on the market. Accordingly, the March CBOT futures contract reached a seven-month high this week while the December contract closed above $4.00 on Wednesday. Moreover, Brazilian corn prices have gained over $20/MT since January, despite threats of the country’s looming corn crop. The production forecasts for Brazil and Argentina point to a 28 percent total gain in corn production this spring, but markets are still moving higher. U.S. FOB Gulf corn is now priced under Brazil, pointing to the oddity of the demand situation. Of course, once the Brazilian harvest starts, the relationship will likely flip in accordance with traditional, seasonal price pressure. For now, though, U.S. exporters are enjoying an extended competitive advantage.
U.S. export sales were again robust this week, totaling 42 million bushels with 11.2 million bushels sold from the 2017/18 crop. Exports increased 5 million bushels over last week, reaching 49.3 million bushels; the highest weekly export figure since December 1, 2016. This week’s export activity puts YTD U.S. corn exports at 868.2 million bushels, up 67 percent from last marketing year. The USDA released Thursday their Baseline Trade Projections and pegged U.S. corn exports growing from 49.5 MMT in 2017/18 to 51.4 MMT by the 2020/21 crop year and 55.2 by 2026/27.
Last week’s WASDE report created some interesting price action across the grains complex at the CBOT. With a more bearish soybean report, traders were unwinding long soybeans/short corn or wheat positions, giving a lift to corn and wheat prices. Additionally, fund managers have been active buyers this week, adding to their long positions. The world seems reluctant to be short corn with export demand so strong and the possibility for much higher feed demand.
From a technical perspective, the uptrend in March corn futures is strengthening and this week’s trading has all been conducted above the 10, 20, and 40-day moving averages. Support has been formed at $3.71 ¾ and again near the 20-day and 40-day moving averages. Bulls are now shooting for a target price of $3.87 ½, the July 14 high. For now, it looks like the momentum is towards higher prices following the established trendline.