Chicago Board of Trade Market News
USGC is looking for a new manager of global trade. This position supports worldwide activities, monitors and tracks trade issues and manages programs to expand markets. More information can be found here.
Outlook: Range-bound, quiet trading has defined the CBOT corn market this week. The week’s largest daily change came on Wednesday as the market digested USDA’s January 1 cattle inventory numbers which showed a 3 percent increase in beef cow numbers. The resulting implications for feed demand pushed the market higher. Bearish factors are still weighing against the market with improving weather in Argentina and Brazil and a probable slowdown in ethanol production. Despite another record-breaking production week ethanol margins are sharply lower than three months ago, and eventually production will slow – reducing corn demand. A combination of factors make the most probable outcome for the market continued, choppy trading for the next few weeks.
Decreasing export sales were noted in this week’s USDA report as sales dropped to 45.6 million bushels, with 45.03 from the current marketing year. Weekly exports totaled 30.1 million bushels, a fall from the past two week’s comparatively strong exports. YTD exports are 65 percent higher than last year as U.S. export prices have remained very competitive on the world stage. Exports will likely remain strong for a few weeks yet, before the Brazilian harvest kicks in, as South American farmer selling remains very light. A rally in the CBOT could shake loose some farmer-held corn but many farmers have good credit lines and little financial need to sell right now. Additionally, Argentine corn is priced $0.90/MT cheaper than U.S. corn which is not worth the quality difference to many global buyers. Look for exports to remain buoyant in the near-term with decreases coming in the next few months.
Commodity funds are still long corn futures, according to last Friday’s CFTC data. Noncommercial traders are holding a net position of 106,000 contracts, their largest long since November, 2015. Commercials took advantage of the recent rally to sell and hedge inventory, adding 25,000 contracts to their short position. Going forward, the pattern of fund buying and commercial selling is likely to produce choppy trade. It’s difficult to get funds to sell when prices are at multi-year lows and inflation is rising. At the same time, commercials hardly want to be long with 15 billion bushels of corn in the U.S. and more global production coming.
The March contract is still grinding higher along its shallow uptrend. The contract found significant support at the 40-day moving average earlier this week near $3.58 and has since bounced higher. Still, bulls appear unwilling to make a run at breaking out above $3.72, at least not without some new information to trade on. Sideways, choppy trading has been the modus operandi for the contract since September and it doesn’t look likely to change soon. Major support and resistance are forming at $3.58 and $3.72, respectively, and the market will likely trade this range without any new information. Next week’s WASDE report could be the catalyst to break out of this trading range.