Chicago Board of Trade Market News
Outlook: Corn’s headline number from the May WASDE was a 13 percent reduction in global ending stocks. The USDA pegged 2017/18 ending stocks at 195.3 MMT, below pre-report expectations. Likely reductions in Chinese and U.S. production cut the world production figure by 3 percent to 1,033 MMT. Global consumption for 2017/18 was unchanged at 1,214 MMT.
The only change to the 2016/17 U.S. balance sheet was a 25 million bushel increased in Food, Seed, and Industrial (FSI) use, which drove a commensurate decrease in U.S. ending stocks. The USDA did not increase U.S. exports or ethanol use like many analysts had expected. The lack of action leaves open the possibility for adjustments in these categories in June, which will give USDA time to evaluate the competitive pressure of Brazil’s corn exports. If ethanol production continues at its average pace for this year, USDA could increase corn for ethanol use by 100 million bushels in later reports.
The USDA projected U.S. production will reach 14.065 billion bushels of corn from the 2017/18 crop. A projected yield of 170.7 bushels per acre and 82.4 million harvested acres created the production figure. If realized, this year’s production would be a 7 percent reduction from the record set in 2016/17. The USDA increased FSI and ethanol consumption by 80 million and 50 million bushels, respectively. Smaller U.S. supplies and increased global competition for exports reduced the 2017/18 U.S. export forecast by 350 million bushels from the prior year.
The USDA predicted 2.11 billion bushels in U.S. ending stocks for 2017/18, down 1 percent from the current marketing year. The figure implies an ending stocks-to-use ratio of 14.8 percent, down from 2016/17. Because of the ending stocks figure, the USDA did not change the U.S. average farm price for corn, leaving it at $3.40 per bushel.
Technical indicators are giving a neutral outlook for July corn. The RSI and stochastic oscillators are decidedly directionless while moving average lines are converging in a jumbled mess. Some upward price direction exists above the contract’s major support at $3.61, but it’s hard to call this a trendline. The case for a downtrend, however, is more easily made when looking back toward the mid-February highs. The market will continue to trade the weather forecasts for now, leaving a choppy trading pattern for the near future.