Market Perspectives – May 7, 2020

Chicago Board of Trade Market News

Outlook: July corn futures are 0.5 cents (0.2 percent) lower this week as the markets have mostly traded quietly sideways. Trading volume has diminished significantly this week as both buyers and sellers are taking a “wait and see” approach. Favorable weather across the U.S., EU, and Black Sea regions has eased supply-side concerns for the 2020 crop and demand remains the big question.

The weekly Export Sales report was neutral/bullish the corn market with 914 KMT of gross corn sales and 774 KMT of net sales reported this week. The net sales figure was down from the prior week as the dollar’s recent rally has alter export dynamics. The weekly export figure rose 33 percent to 1.4 MMT. YTD exports now stand at 24.1 MMT, down 33 percent from a year ago while YTD bookings (exports plus unshipped sales) stand at 37.5 MMT, down 19 percent.

Cash corn values are steady across the U.S. this week with the average basis level dropping 1 cent to average 34 cents under July futures (-34N) this week. Basis levels remain in-line with their five-year average as commercial buyers continue to extend coverage on market dips. Barge CIF NOLA values are slightly firmer this week while FOB NOLA offers are up 1 percent at $148.25/MT for spot shipment.

Sorghum prices have stabilized after more than doubling since March. FOB NOLA spot shipment positions are still offered at 240 cents over July future (240N) while deferred positions are slightly lower at 230N. China remains the most aggressive buyer, securing 139.5 KMT last week, with Mexico and Japan also securing product.

U.S. farmers continue to make exceptional progress planting the U.S. crop. USDA reported that, as of Sunday night, 51 percent of intended corn plants were completed, which was nearly double the prior week’s progress and is well above the five-year average of 39 percent. In contrast to last year, farmers have faced very favorable weather conditions this year that is allowing seeding to progress at a near-record pace. Notably, key corn-growing states, including Iowa, have planted more corn by the first week of May than in any of the past five years.

From a technical standpoint, July corn futures have ended their downtrend and have turned sideways. Contract lows remain a major support point and the influence off the downtrend is fading quickly. Thursday’s trade saw the market close above the 10-day moving average (MA) for the first time since late March. The 20-day MA is the next upside resistance level but the close above the 10-day MA may bring in additional technical buying in the near-term. Seasonally, the corn market tends to have at least one weather-driven spring rally, and speculative funds as well as short sellers are reluctant to extend short positions ahead of a possible weather market.