Market Perspectives – January 23, 2020

Chicago Board of Trade Market News

Outlook: March corn futures are 4.5 cents (1.2 percent) higher this week after the market rallied from last Thursday’s steep losses. The futures market has recovered all that it gave back last week and had an upside breakout from its recent trading range. Exports are starting to become an encouragement to the market, and technical developments are following.

The weekly Export Sales report is delayed one day due to Monday’s U.S. holiday, but the Export Inspections report showed 345,000 MT of corn inspections. That figure was down from the prior week but was enough to put YTD shipments at 9.4 MMT. YTD inspections are down 54 percent. The report also featured 18,800 MT of sorghum inspections, which bring YTD totals up 73 percent from the prior year and 318 MT of barely inspections. YTD barley inspections, 17,246 MT, are up 164 percent.

On Thursday, USDA announced daily export sales of 284,000 MT (11.2 million bushels) of corn that was sold to Guatemala and “unknown” destinations. Most of the sale was for 2019/20 corn. The market saw the combination of the daily sales and continued expectations for increased demand/purchases from Asian countries as a bullish development. U.S. FOB Gulf corn is now among the cheapest in the world, which should allow U.S. sales and shipments to pick up substantially.

Cash corn prices are firmer this week with the national average price reaching $147.53/MT. Basis has weakened slightly with the futures market rally and now averages 19 cents under the March contract. Barge CIF NOLA prices are up 3 percent this week while FOB NOLA offers are up the same percentage at $179.25/MT.

From a technical standpoint, March corn has broken above its recent trading range, closing above what was key resistance at $3.92 on Thursday. The strong technical day, combined with heavy trading volume, suggests continued rally potential is significant. With exports likely to pick up for several reasons and Brazil’s second corn crop increasingly at risk of a late planting, funds and traders are reluctant to remain short corn futures. As those short positions are excited, the market is apt to show notable strength. Open interest in corn futures, however, will be important to watch. That metric will provide insight into whether any rally is driven purely by short covering or if long-position taking (which will support a larger rally) is developing as well.