Chicago Board of Trade Market News
Outlook: March corn futures are up 2 ¼ cents (0.3 percent) this week as rallies Friday and Tuesday were all but erased by weaker trade Wednesday and Tuesday. The January WASDE’s bullish surprises lingered for a few days and allowed bulls to push prices higher but the recent shift in the South American precipitation forecast gave bears the upper hand towards week’s end. After months of extreme drought, Argentina is finally forecast to receive widespread and beneficial rains this week and next. Total precipitation could be as much as 50-127 mm (2-5 inches) and while it won’t completely relieve the drought, it will go a long way towards improving crop conditions.
The Argentine drought and its impact on the country’s corn crop remains a bullish influence for world grain markets. Just days after the January WASDE pegged Argentina’s corn output for 2022/23 at 52 MMT, the Rosario Grain Exchange issued its forecast of 37 MMT, which was down 12 MMT from its prior estimate. The exchange’s move agrees with some private forecasts, though most analysts still expect the crop to be at least 42 MMT. Regardless, these figures show just how damaging the drought has been to date and how welcome are the predicted rains.
Ethanol production continues to rebound strongly with lower natural gas prices helping margins. Production rose 6.9 percent last week and topped 1 million barrels per day for the first time in four weeks. Ethanol stocks fell 1.7 percent during the second week of January, due partly to a 7 percent increase in gasoline consumption and also to lower ethanol output during the prior three weeks.
The weekly Export Sales report is delayed due to Monday’s U.S. holiday, but Tuesday’s Export Inspections report featured 774 KMT of corn shipments last week. That volume was up 93 percent from the holiday-reduced volumes the prior week and put YTD inspections at 10.775 MMT. YTD inspections are down 30 percent. On Thursday, the USDA reported 195 KMT of corn sold to Mexico for the 2022/23 as part of the daily export sales reporting program. That sale followed one for 150 KMT reported on 17 January with the corn destined for Colombia in the 2022/23 marketing year.
From a technical standpoint, March corn is pulling back from Tuesday’s bullish breakout above trendline resistance and the 200-day moving average as that rally saw limited follow-through buying. The rains predicted for Argentina and southern Brazil sparked some profit taking and long liquidation by managed money funds, though trading volume has been light. Despite the recent pricing strength, export sales remain active with USDA reporting two large sales to Colombia and Mexico this week. The commercial and export activity should help keep the market supported going forward. March corn has trendline support at $6.52 ½ and support at the early December low of $6.35 with resistance overhead at $6.90-7.00.