Corn Futures Balance Between Soft Ethanol Demand and Black Sea Disruption Threats

Corn prices saw modest losses for the week 0.33%.  Black Sea supply concerns from Putin’s mobilization of more Russian troops and threats to exports balances out with insipid export demand and soft energy markets. The ethanol market is not signaling the need for enlarged production with current stocks filling demand. Gasoline consumption has failed to match year-ago levels since mid-summer.

US Corn Field
Corn Crop

The June 30 Acreage report showed corn again the largest crop produced in America in 2022. USDA raised 2022 acreage expectations for corn by 431,000 acres from the March 31 report. Much of the pullback in corn futures has been taking pressure off from the speculative surge on record corn export volumes and higher unit values.

Longer term corn prices remain underpinned by possible U.S. planting delays and Ukraine grain unavailable for export.

Corn Futures Highlights

  • December futures dropped 13.25 cents to $6.75 Friday
  • March futures were down 13.5 cents to $6.7975.
  • Corn basis bids were mostly steady across the central U.S. but did tumble 15 to 20 cents lower at two Indiana ethanol plants on Friday.
  • Preliminary volume estimates were for 247,428 contracts, moving well ahead of Thursday’s final count of 149,552.

Corn Technical Outlook

Corn replicated last week’s price action as it recovered from its freefall it has worked its way up spitting off Kijun at the 7/8 and holding the top of the weekly cloud after Tenkan and 50wma was recaptured. Earlier in the year Corn had topped out at the highest since 2012 in Chicago at +1/8 and corrected with impulse back to break the Tenkan which it swiftly did a spit of a spit after bouncing off 720, which also the price successfully retested the high from April 2021. From here we saw Tenkan fail again, and empowered selling smashed through previous high, Kijun and 7/8 confluence. The 50wma gave no support with the cloud and 6/8 slowing the selling down. All these levels are now significant.

Corn Futures Weekly via KnovaWave

USDA September WASDE Report

  • USDA lowered planted acreage for the 2022-23 corn crop by 1.2 million acres (ma) to 88.6 ma and cut estimated harvested acres by 1 ma to 80.8 million acres.
  • USDA dropped the yield estimate 2.9 bpa to 172.5 bushels per acre.
  • The average pre-report yield estimate was 172.4 bpa.
  • The updates put corn production at 13.944 bb.
  • USDA lowered the old-crop carryover by 5 mb to 1.525 bb.
  • USDA put 2022-23 corn ending stocks at 1.219 bb, down 169 mb from August.

EPA Review on Atrazine

The Environmental Protection Agency is in the middle of a review of atrazine and recently extended its deadline for comments to October 7.

“For nearly 60 years, atrazine has been a reliable and proven herbicide for effective and efficient sustainable farming practices,” notes Farm Futures policy editor Jacqui Fatka. “However, the use of atrazine is at stake, a product included in more than 90 herbicide products across the U.S., and one that is utilized on 75% of U.S. sorghum acres.”

WAOB Corn Stocks

The WAOB also took the world ending stocks number to 306.68 MMT, a 6.22 MMT reduction. That was led by the US and EU production cuts, with the latter down 8 MMT to 60 MMT. Ukrainian production was raised 5 MMT to 30 with exports up 3.5 MMT.  

U.S. EPA Blending Targets

The EPA released blending targets after the market close last Month. Biofuel blending targets for 2022 are forecast at 20.63 billion gallons, below the proposed volume. Retroactive adjustments for 2021 blending were above market expectations while 2020 volumes went unchanged.

The EPA added a 250-million-gallon supplemental standard to the 2022 blend mandates. It also denied 69 petitions for biofuel blending exemptions from refineries but will allow small refineries extra time to fulfill 2020 blending mandates.

USDA’s weekly Ethanol Report

USDA’s weekly Ethanol report showed prices were UNCH from $1.94/gal to $2.55/gal. Corn oil prices were $1-2 dollars weaker to 71-76 cents/b.

Europe

European grain trade association Coceral reported Friday that it is cutting its projection for EU corn production from 2.598 billion bushels in May down to 2.043 billion bushels after several key growing countries were hurt by long stretches of hot, dry weather throughout the summer. Coceral made “significant downward revisions” in France, Germany, Italy, Hungary and Romania. If realized, this would be a 15-year low and 26% below 2021’s output of 2.764 billion bushels.

Consultancy Strategie Grains is a bit more bullish on 2022 EU corn production after offering its latest projection of 2.083 billion bushels. Its estimates have also fallen more than 20% over the past several months.

France

France is Europe’s top grain producer.

France’s 2022 corn harvest is 26% complete through September 19, per the latest reporting from farm office FranceAgriMer. Harvest is off to a much earlier start due to hot, dry conditions that severely damaged crop quality this season.

Only 43% of the crop is rated in good-to-excellent condition, steady from a week ago. Production could spill to the lowest level since 1990 for Europe’s top grain producer.

Germany

Germany’s agriculture ministry expects the country’s 2022 corn production to tumble 21.5% lower from year-ago totals to 137.8 million bushels after facing multiple heatwaves and historically severe drought. Yesterday, the European Commission lowered its forecast for 2022/23 EU corn production by nearly 10% to 2.335 billion bushels.

Ukraine Corn Plantings

With exports from Ukraine severely limited at present, the EU may need to seek corn from further afield. And tight European supply could drive corn prices up and help wheat compete with corn for use in animal feed.

Ukraine’s 2022 corn harvest is just underway, with the country’s agriculture ministry reporting a progress of 0.5% so far. Production expectations currently range between 984.2 million and 1.063 billion bushels. That would be a decline of as much as 41%, if realized. Exports so far during the 2022/23 marketing year have reached 162.7 million bushels.

Argentina Exports

Argentina is the world’s No. 2 corn exporter and is a top seller of other commodities including soybeans and soymeal.

Drought is creating problems in Argentina. Farmers are facing the worst drought conditions in nearly 30 years. Many farmers plan to delay plantings this season, and the Rosario grains exchange may cut its acreage forecast from its current estimate of 20.262 million acres.

Argentina’s 2021/22 corn production is expected to reach 2.047 billion bushels, according to the latest estimates from the Buenos Aires Grains Exchange, climbing 6% higher than the group’s prior estimate from a week ago, due to better-than-expected yields in the Chaco and Salta provinces, along with an upward revision to planted acres. Harvest is around 98% complete.

Brazil

An ongoing protest by federal revenue service auditors in Brazil has caused delays to payments for recent corn exports. “The scenario is shaping up to be much worse [than it has been],” according to Sergio Mendes, director general of Anec. The auditors have made several demands that include hiring more staff and receiving raises and performance-based bonuses.

USA Corn Exports

The USDA Exports for the 2022/23 marketing year are expected to come in at 2.4 billion bushels (down 25 million bushels for July.

South Korea Imports

South Korean importers purchased 2.4 million bushels of food-grade corn from optional origins in a deal that closed earlier this week. The grain is for arrival around November 10.

Taiwan Imports

Taiwan made no purchases in its international tender for 2.6 million bushels of animal feed corn that closed earlier this week. The country will likely issue a similar tender that closes next week.

Effect of Higher Input Costs on Farmers

A recent report by the Agricultural and Food Policy Center (AFPC) at Texas A&M University shows higher input prices are having a larger impact on farmers than originally thought.

  • Net cash farm income on the representative feed grain and oilseed farms is projected to decline by an average of $534,000 from 2021 to 2022 across the 25-feed grain and oilseed farms.
  • Representative wheat farms face an average reduction in net cash farm income of $399,000.
  • Representative cotton farms face an average reduction in net cash farm income of $716,000.
  • Rice farms face the largest reduction in net cash farm income per farm at $880,000 and a per acre reduction of $442.

Compiled by Joe Outlaw, Ph.D., and Bart Fischer, Ph.D., co-directors of the AFPC.

COT on Commodities

  • The CFTC Commitment of Traders report showed managed money funds were 247,909 contracts net long in corn as of the 9/20 settle. That was a 7,266 contract bigger net long position, with net new buying.
  • Commercial shorts were net new sellers during the week, extending their net short by 6.7k contracts to 461,638. That was their strongest net short since June.

Commodity Round Up

Highlights

  • The Bloomberg Commodities Index dropped 3.7% (up 13.3% y-t-d).
  • Spot Gold declined 1.9% to $1,644 (down 10.1%).
  • Silver slumped 3.7% to $18.87 (down 19.0%).
  • WTI crude sank $6.37 to $78.74 (up 5%).
  • Gasoline slipped 1.4% (up 7%),
  • Natural Gas sank 12.1% to $6.83 (up 83%).
  • Copper dropped 4.9% (down 25%).
  • Wheat gained 2.4% (up 14%),
  • Corn was little changed (up 14%).
  • Bitcoin lost $650, or 3.3%, this week to $19,000 (down 59%).

Source: TC, USDA, Farm Progress

From The TradersCommunity Research Desk