Market Perspectives – March 9, 2023

Chicago Board of Trade Market News

Outlook: The May corn futures are 28 ¼ cents lower this week as the market sold off in response to a more bearish WASDE. USDA issued an outlook for old crop corn that featured smaller exports and greater ending stocks, despite a sharp reduction in the Argentine corn crop estimate. USDA lowered its forecast of the 2022/23 U.S. corn export program by 1.905 MMT (75 million bushels) due to the current pace of exports and raised ending stocks by an equal volume. U.S. carry-out is now forecast at 34.09 MMT (1.342 billion bushels), down 2.5 percent from the prior year and the second smallest since 2013/14.

Perhaps the most-watched numbers in the March WASDE were the Argentine corn and soybean production figures. The massive drought blanketing the country came at some of the worst times for the early planted corn crop and is causing the late crop’s conditions ratings to plummet. In response, USDA shaved off 7 MMT from the Argentine production estimate, which is now forecast at 40 MMT. Note that this figure is still above some private estimates. The Argentine corn yield was pegged at 5.97 MT/ha, the lowest since 2011/12, which was also a drought year.

The world corn balance sheet saw production fall by 3.8 MMT due to a smaller Argentine crop that was partially offset by larger production in India and Paraguay. USDA lowered its forecast for both world exports and imports and pared back 1.772 MMT from the world total consumption estimate. World ending stocks are now forecast at 296.5 MMT, up slightly from the February estimate but down 3 percent from 2021/22.

Beyond the WASDE, the market continues to watch the U.S export pace, ethanol demand, and the Brazilian safrinha crop’s planting progress. U.S. exports rose sharply last week and it a marketing year high of 1.73 MMT of gross sales with exports rising 58 percent to 1.05 MMT. YTD exports now total 16.081 MMT (down 42 percent) and YTD bookings (exports plus unshipped sales) total 30.65 MMT (down 39 percent). While exports have been slow so far, ethanol producers’ demand for corn continues to strengthen amid falling natural gas prices and (until this week) rising oil values. Ethanol production rose 0.7 percent last week and topped 1.0 million barrels/day for the eight straight week. Finally, seeding the Brazilian safrinha corn crop remains delayed as rains hamper the first-crop soybean harvest. Current estimates indicate 70 percent of the safrinha crop is seeded but the “ideal” planting window which essentially closes at the end of February. That means roughly one-third of this year’s crop will be seeded outside this ideal window, with possible negative agronomic impacts.

From a technical perspective, May corn has broken major support planes on Thursday with a close below the 1 March daily low ($6.22 ¼) and the 18 August daily low ($6.11 ½) . Now, the market is targeting major psychological support at $6.00, where commercials are likely to have a significant volume of resting buy orders. Funds remain net sellers but quantifying their current net position has been difficult as the CFTC’s weekly Commitment of Traders report is still delayed due to a cyber-attack earlier this year.