Chicago Board of Trade Market News
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Outlook: Following last week’s surprise-laden trading, the corn market has been comparatively subdued – though not without action – this week. Fundamental news was light and offered little change to the market’s outlook. The surprising increase in the national average corn yield has been absorbed by the market which is now largely focused on exports. The weather in Brazil has moderated substantially, allowing planting to progress, and forecasted rains are timely for the fledgling crop’s development. Accordingly, the market’s primary trading action has been lower since there are more bushels in the U.S. and a diminishing risk of poor Brazilian production.
Over 93 percent of the U.S. corn crop is in the bin now (per USDA). While some states in the Upper Midwest, notably Ohio and Michigan, are lagging last year’s pace, nearly all other states are ahead of schedule. Accordingly, basis and cash prices should start to firm as it will take additional incentive to motivate the sale of corn now safely tucked away in bins.
Beyond the cash market strength induced by the harvest’s waning days, strong demand from the ethanol industry is supporting cash prices. Ethanol production remains above projections and was higher this week. Exports appear to be key for the ethanol industry right now but their future is uncertain given the political uncertainty in U.S. international relations.
Political uncertainty may also hamper U.S. corn exports, which are up 79 percent over last year, later in the marketing year. The markets are carefully watching to determine President-elect Trump’s leanings on policies that will influence exchange rates and export opportunities. The Mexican peso has fallen substantially against the dollar during the past week and the same fate has been suffered by other forex markets. Despite an uncertain future, however, exports of U.S. corn are likely to pick up during the last weeks of 2016 and into early 2017 as international buyers purchase before the new administration takes office.
Going forward, December corn futures are relegated to rangebound trading with a slight upward tilt. Technically, the nearby contract remains in a mild uptrend that is starting to bend downward and the once uptrend-signaling moving averages are converging into a largely directionless pile of lines. Corn trading volumes have been light this week and the market has not traded outside of a 6 ½ cent range. Traders tested technical support at $3.37, found that it held, and have since turned their sights to a test of $3.45. Outside these immediate targets, major support will be found at $3.30 with the most significant resistance at $3.60. Without significantly interesting new fundamental information, however, a test of either point is unlikely. From a risk standpoint, any downward price movement will likely be sudden and driven by a collapse in the export market. The market has more upside potential but any movement will be slow and the result of strong commercial demand prying newly-stored corn from bins.