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Outlook: In the week following USDA’s announcement of the largest corn crop on record, prices have rallied. Since the market’s close on October 12 (the October WASDE release date) December futures have climbed 14 cents, buoyed by better-than-expected demand. Exports and ethanol have been supportive to corn, even as combines continue to harvest the 15-billion-bushel crop. Harvest had reached 46 percent complete across the U.S. as of Monday’s USDA report and is now likely well above 50 percent. This year’s harvest is lagging behind both last year’s and the five-year average pace but good weather has largely alleviated any harvest concerns. Indeed, the good weather may be helping delay the harvest as farmers temporarily “store” unharvested corn in the field. Storage capacity will be very tight this year and reports of grain being stored uncovered in piles on the ground are already surfacing. With the supply situation essentially fixed for the year, attention will be focused on demand to work off this year’s record production.
Lower crop prices have certainly performed their function of stimulating demand to absorb the coming large crop. The latest export sales report from USDA shows exporters sold 40 million bushels of corn last week and exported 33.5 million, bringing marketing-year-to-date exports to nearly 300 million bushels. More impressively, year-to-date bookings (exports plus outstanding sales) have reached 885 million bushels, an increase of 89 percent from this time last year. USDA’s October projections for U.S. 2016/17 corn exports totaled 2,225 million bushels, and this week’s sales exceeded what was needed to meet this figure.
Similar to export trends, corn has been receiving support from the ethanol market which is experiencing seasonally high demand. The warm October weather has been extending the driving season and the Department of Transportation reports traffic miles across the U.S. are up 3 percent in 2016. Ethanol margins have been excellent in recent weeks which is pulling more corn into the ethanol grind.
December corn futures spent much of the past week trading above key technical support at $3.50. The rally was initially triggered by managed money short covering and some commercial end-user buying but was further supported by demand fundamentals. Thursday’s early trading saw a high price traded just below $3.60 (another important technical point) but bulls were unable to push the market higher and a round of farmer and commercial selling sent the corn markets sharply lower. From a technical perspective, Thursday’s trading was bookended by both bearish and bullish factors. Bearish signals were flashed as December corn failed to close (or trade very long) above the 100-day moving average ($3.58) and did briefly trade below $3.50. Bulls can remain optimistic, however, as the contract closed above both the10-day moving average and the $3.50 mark. The 10, 20, and 40-day moving averages continue to indicate a bullish trend may be developing, though after increasing over 40 cents from the life-of-contract low ($3.14 ¾) the market may pause and correct before demand can move prices higher.