The selling in corn and other grain futures continued this week. Corn futures fell 7.8% for the week though it reversed some of those losses Friday with some short covering. Much of the pullback has been taking pressure off from the speculative surge on record corn export volumes and higher unit values. Focus is on next Thursday’s planted acres and quarterly stocks updates from USDA is one of the agency’s most highly anticipated reports of the entire year. The report is known to have limit up or limit down reactions.
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 dropped 7.8%, still up 14% ytd
- Futures prices ended Friday’s trading session with July futures up 2.75 cents to $7.4950, September futures rose 15.75 cents to $6.8250.
- Preliminary volume estimates were for 406,936 contracts, tracking 32% lower than Thursday’s final count of 600,962.
- Corn basis bids showed some variability in either direction on Friday, moving as much as 10 cents higher at an Illinois river terminal and as much as 11 cents lower at an Ohio elevator today.
- Old crop corn sales came in at 26.5 million bushels for the week ending June 16.
- New crop sales accounted for another 14.1 million bushels, for a total of 40.6 million bushels. That was toward the higher end of trade estimates, which ranged between 19.7 million and 47.2 million bushels.
- Cumulative totals for the 2021/22 marketing year are still moderately behind last year’s pace, with 1.977 billion bushels.
Corn Technical Outlook
Corn rally topped out at the highest since 2012 in Chicago at +1/8 and has corrected back to break the Tenkan which it swiftly regained after bouncing off 720, which also the price successfully retested the high from April 2021. From here we Tenkan failed again. Support is at the Kijun 7/8 confluence.
“Farmers are in a race against the clock to get their crops in the ground this week, with planting of corn, soybeans and wheat well behind their usual pace. Wet and cool temperatures in key parts of the Midwest have delayed farmers’ planting plans, leaving them days to get crops in the ground before they start to lose out on a bigger harvest. If they don’t, some grain traders say that already high prices for agricultural commodities could rise even more… The U.S. Department of Agriculture said 22% of corn was planted, compared with 50% for the previous-five-year average. For soybeans, 12% was planted, compared with the previous-five-year average of 24%, and 27% of spring wheat was in the ground compared with a typical 47%…”
May 11 – Wall Street Journal (Patrick Thomas and and Kurk Maltais):
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
France is Europe’s top grain producer.
French farm office FranceAgriMer reports that the country’s corn quality ratings spilled three points lower from a week ago, with 84% of the crop in good-to-excellent condition through June 20.
European Union grain trade association Coceral slightly lowered its estimates for EU corn production this season to 2.598 billion bushels earlier in June. That would be a year-over-year decrease of 1.8%, if realized.
Ukraine Corn Plantings
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.
Corn Exports
Corn export shipments fell 26% below the prior four-week average to 45.2 million bushels. China, Mexico, Japan, Taiwan and Colombia were the top five destinations.
Earlier this month a USDA-ERS report showed U.S. corn exports in fiscal year 2022 are now forecasted to improve by $2.2 billion, reaching a new total of $19.1 billion “due to record volumes and higher unit values.
Total U.S. agricultural exports are expected to improve $7.5 billion to reach a record $191.0 billion.
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.
Commodity Round Up
- Bloomberg Commodities Index fell 4.3% (up 22.3% y-t-d).
- Spot Gold slipped 0.7% to $1,827 (unchanged).
- Silver declined 2.3% to $21.16 (down 9.2%).
- WTI crude fell $1.94 to $107.62 (up 43%).
- Gasoline rose 2.4% (up 74%),
- Natural Gas sank 10.4% (up 67%).
- Copper slumped 7.1% (down 16%).
- Wheat sank 10.5% (up 22%),
- Corn dropped 7.8% (up 14%).
- Bitcoin recovered $750, or 3.6%, this week to $21.277 (down 54%).
Source: TC, USDA, Farm Progress
From The TradersCommunity Research Desk