Corn prices closed off their highs Friday, both September corn and December corn were up 1¢ after being up 14c in the morning. Corn closed the week with gains of more than 10%, the best weekly performance since early March. On Thursday, commodity funds were net buyers of corn by +11,000. The weekly Crop Progress report next week is expected to show crop ratings stable if not down 1% to 2%. With the current supply and demand situation in the U.S. relatively tight on corn, we need to have a trend line yield of 177 bushels per acre on corn.
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. Ukraine’s spring plantings are now 98% complete and will drop 25% from a year ago due to the ongoing Russian invasion, per the country’s agriculture ministry. That includes 10.304 million acres of corn. The USDA last week appeared to be optimistic about Ukraine however.
Corn Futures Highlights
- Corn futures prices ended Friday’s trading session with September futures adding 3.5 cents to $6.1850, with December futures up 3.25 cents to $6.2225.
- Corn basis bids were largely steady across the central U.S. on Friday with one major exception after tumbling 20 cents lower at an Illinois processor today.
- Preliminary volume estimates were for 313,463 contracts, which was well above Thursday’s final count of 205,358.
Corn Technical Outlook
Corn recovered from its freefall rejected at the 4/8 and bottom of the weekly cloud. The Corn rally 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 resistance.
Domestic Corn Stocks
Domestic ending stocks for 2021/22 increased to 1.485 billion bushels, and 2022/23 ending stocks also moved higher, reaching 1.400 billion bushels. Analysts expected to see a modest decline for both numbers. The season-average farm price for producers held steady, at $6.75 per bushel.
Planted acres and quarterly stocks updates from USDA
Next Thursday’s the USDA releases its planted acres and quarterly stocks updates. This is one of the agency’s most highly anticipated reports of the entire year. This year, with the delayed spring planting it will be interesting to see how the USDA has planted acres for corn.
Currently the U.S. planted acres for corn are pegged at 89.5 million acres, with harvested acres at 81.7 million acres (approximately 91.3% of the planted acre number). Yield has already been adjusted lower to 177 bpa.
Three scenarios via Naomi Blohm, senior market adviser with Stewart Peterson.
“Traditionally the price reaction on this report day can be dramatic; potentially leaving prices nearly limit up or limit down depending on the information received,” according to Naomi Blohm, senior market adviser with Stewart Peterson.
- Should corn planted acres come in slightly lower at 89 million acres, then ending stocks would be down to 1.321 versus the current 2022-23 estimate of 1.4 billion bushels.
- If planted acres come in slightly larger at 90.5 million acres, then ending stocks would be pegged at 1.565, and would then likely keep corn futures trading each and every weather forecasts throughout July to get a better handle on yield.
- Should planted acres come in at 91 million acres, then ending stocks would swell to 1.648 billion bushels, comfortably larger than 1.4 billion bushels estimated now.
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.
France is Europe’s top grain producer.
Hot, dry conditions in France have the country’s corn crop on its heels, with the country’s FranceAgriMer farm office reporting a seven-point quality decline this past week. Sixty-eight percent of the crop is now rated in good-to-excellent condition through July 25. France is Europe’s No. 1 grain producer.
General market sentiment is that wheat crop conditions are better than anticipated, despite adverse weather conditions during key planting and development stages. The early harvest could encourage farmers to sell as silos fill up, but exporters have already sold significant volumes of French wheat ahead of the northern hemisphere’s key exporting period that ranges from 10 August to the end of September, meaning forward supply is tight.
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. Euronext-listed corn futures rose for the second consecutive day on 14 July, even as the milling wheat contract returned to losses.
Ukraine’s spring plantings are now 98% complete and will drop 25% from a year ago due to the ongoing Russian invasion, per the country’s agriculture ministry. That includes 10.304 million acres of corn, 2.292 million acres of spring barley and 466,000 acres of spring wheat.
The Ukrainian Agribusiness Club estimates that the country’s total grain production will drop nearly 38% this season. That includes corn production sliding 39% lower to 1.012 billion bushels and wheat production dropping 44% to 661.4 million bushels. Ukraine is a significant exporter of both crops.
Argentina is the world’s No. 2 corn exporter and is a top seller of other commodities including soybeans and soymeal.
The BA Grain Exchange indicated the Argentine corn harvest moved ahead 11 points to 67%, trailing the 5-year average by 8 points. Production remains estimated at 49 MMT. This is 4 less than the USDA estimated.
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
Corn export sales latest 4-week average (old and new) at 12+ per week is double the pace from a year ago it is down more than 50% versus the 5-year seasonal average.
Last week we had Canada again cancelled corn, 2.1 mbu this week after canceling 4.0 mbu last week. Yet, the USDA quietly raised its forecast for 21-22 Canadian corn imports from 150 mbu in June to 212 in this month’s WASDE. Canadian year-to-date purchases from the U.S. total 145 and year-to-date shipments total 134 mbu.
Talk China will approve and buy Brazil corn this summer. Others are of the opinion it will not happen until after the 1st of the year. Also, noted from weekly export sales, origin sales of old crop corn to “Other Asia” (excludes China) are at a 13-year low.
Tight supplies, a strong dollar, and waning demand from top global grains buyer China have played a significant role in keeping marketing year to date weekly corn export volumes nearly 11% lower than the same time last year.
South Korea Imports
South Korea’s MFG and NOFI groups bought a total 204 K MT of South American/South African corn for November arrival.
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
COT on commodities covering the week to July 12 saw selling pressure from hedge fund begin to ease. The net long dropped to 900k lots, lowest since June 2020 but the 52k reduction was well below the 190k average seen during the previous four weeks.
Specs turned net buyers of crudeoil, copper and sugar with selling seen in natgas gold soybeans corn wheat and coffee. The gross position (long & short) was cut by 177k reflecting a high degree of uncertainty and vacations lowering exposures
via Ole S Hansen @Ole_S_Hansen
Commodity Round Up
From The TradersCommunity Research Desk