Corn prices corn prices rallied back Friday with some relief from the big reversal in stocks and the dollar to finish the week down 0.91%. 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. DDGS cash prices were mostly $5 to $15/ton lower from $210 (IN) to $340 (MO) regionally.
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
- Corn futures up on Friday for a fractionally UNCH close to the week.
- December futures 5 1/2 cents lower for the week.
- The corn market has a 6 1/4 cent carry to March but otherwise now inverted with a 3/4 cent March premium to May, and a 6 1/4 cent May premium to July.
- December to December spread 59 3/4 cents at the close, compared to 60 3/4 cents las week.
- Corn oil prices were within 5c/lb of last week’s quotes, from 72c to 76c per pound regionally.
- Corn basis bids were mostly steady to firm across the central U.S. after rising 3 to 15 cents higher at four Midwestern locations on Friday. An Iowa processor bucked the overall trend after tracking 10 cents lower today.
- Preliminary volume estimates were for 147,835 contracts, falling moderately below Thursday’s final count of 233,054.
Corn Technical Outlook
Corn replicated last week’s price action as it recovered from its freefall in June it has worked its way up spitting off Kijun at the 7/8 near the top of the weekly cloud after Tenkan and 50wma was recaptured last month. 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. Which is back where we are. The 50wma is now support with the cloud and 6/8 below. All these levels are now significant.
USDA Corn Stocks
USDA reported corn stocks were 1.377 bbu on September 1st,, well below the average trade estimate. That was up by 142m bushels from last year’s count and compares to the average trade guess of 1.495 bbu. Implied Q4 use to finish the 21/22 season was 2.97 bbu, compared to 2.877 bbu used in Q4 of 20/21.
USDA revised 21/22 production 41 mbu lower to 15.074 bbu. That was exclusively through WCB revisions, specifically with a 12.45 mbu cut in IA. MN was lowered by 7.84 mbu, WI by 7.2 mbu, and SD down by 5.48 mbu.
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
- Cash ethanol prices were lower by 1 to 10 cents/gal regionally through the week, with USDA showing prices from $2.20/gal in NE to $2.40/gal in IN.
- DDGS cash prices were mostly $5 to $15/ton lower from $210 (IN) to $340 (MO) regionally.
The European Commission lowered its forecast for this season’s EU corn harvest by 6.4% in August down to a new estimate of 2.185 billion bushels. The continent has been struggling with intense heat and drought throughout the summer and into early fall. The European Commission also raised its estimates for 2022/23 EU corn imports to 826.7 million bushels.
A few weeks ago, 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.
France is Europe’s top grain producer.
France’s 2022 corn harvest is running nearly a month (28 days) ahead of last year’s pace and production could fall to a three-decade low after suffering through months of overly hot, dry weather.
Harvest progress is at 92% through October 17, up from 83% the prior week and well ahead of 2021’s pace of 30%.
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 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. The Buenos Aires Grains Exchange maintained their estimate for 7.5m HA of 22/23 corn area, with planting progress 6% finished.
Brazil’s CONAB estimates their 22/23 corn crop at 126.9 MMT, up from 112.8 MMT in 21/22.
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 Korea purchased 2.4 million bushels of animal feed corn in a private deal on Friday after cancelling an international tender for a similar amount. The grain is likely sourced from South American or South Africa and is for shipment in November.
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 weekly CFTC data release Friday had corn spec fund traders 254,261 contracts net long at the close on 10/18, 13,116 contract lighter net long than the previous week, coming via open longs rolled to new shorts.
- Commercial corn hedgers closed out 35.9k contracts for a net 8,380 contract weaker net short of 455,253.
Commodity Round Up
- The Bloomberg Commodities Index fell 2.1% (up 12.2% y-t-d).
- Spot Gold rallied 0.8% to $1,658 (down 9.4%).
- Silver surged 6.3% to $19.42 (down 16.7%).
- WTI crude slipped 56 cents to $88.05 (up 13%).
- Gasoline added 1.2% (up 20%),
- Natural Gas sank 23.2% to $4.96 (up 33%).
- Copper gained 1.5% (down 22%).
- Wheat declined 1.0% (up 10%),
- Corn slipped 0.8% (up 15%).
- Bitcoin was little changed this week at $19,200 (down 59%).
From The TradersCommunity Research Desk