Corn prices saw wild swings this week, not just from weather but the USDA retracted the new export report after the close of trading Thursday on the move to the new system. Grain futures on the Chicago Board of Trade sold off Thursday in reaction to the figures. Continuous corn futures closed down 1.1%, and on Friday, they bounced back, with corn closing up for the day 2.3%. Weather forecasted hinted at a return to seasonally hot, dry weather in early September expanding the drought in the Western corn belt. The European Commission lowered its forecast for 2022/23 EU corn production by nearly 10% to 2.335 billion bushels.
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
- September futures rose 12.75 cents to $6.7025 Friday
- December futures up 15 cents to $6.65.
- Corn basis bids moved 10 cents higher at an Illinois processor and firmed 3 cents at an Illinois river terminal while holding steady elsewhere across the central U.S. on Friday.
- USDA launched an upgraded export sales reporting system called ESRMS 2.0 as we mentioned did not go to plan causing the agency to retract its latest set of grain export data and issue a statement explaining what happened.
- Preliminary volume estimates were for 256,704 contracts, trending moderately below Thursday’s final count of 298,672
Corn Technical Outlook
Corn recovered from its freefall rejected at the 4/8 and bottom of the weekly cloud and has since run to the tenkan. 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.
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.
USDA August WASDE Report
USDA offered a first survey-based look at its 2022 corn yield forecasts in today’s WASDE report, dropping its estimates by 1.6 bushels per acre to 175.4 bpa. That was a bit lower than the average trade guess of 175.9 bpa. Because of the lower per-acre yields, USDA also lowered its corn production forecast by 146 million bushels to 14.4 billion bushels.
On the demand side, USDA lowered its estimates for 2022/23 corn use by 45 million bushels to 14.5 million bushels. The agency also lowered feed and residual use by 25 million bushels. Exports for the 2022/23 marketing year are expected to come in at 2.4 billion bushels (down 25 million bushels for July. With supply falling more than use, ending stocks fell 82 million bushels to 1.4 billion.
USDA also raised their old crop carryout in the monthly report by 20 mbu to 1.53 bbu. That increase came via a cut to the FSI use. The larger stocks mixed with the production reduction and a larger export forecast took new crop stocks to 1.388 bbu, a 82 mbu drop from the prior report.
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.
French corn conditions continue to erode lower after another week of excessively hot, dry weather. French corn quality ratings are still in freefall, with 47% rated in good-to-excellent condition through August 22, per the country’s farm office FranceAgriMer. That’s another three-point week-over-week reduction and is now far below year-ago results, when 91% of the crop was rated good to excellent.
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
Ukraine’s 2022/23 grain exports are down almost 52% from a year ago, according to the country’s agriculture ministry. The bulk of exports since the beginning of July is comprised of corn sales totaling 76.4 million bushels. Wheat exports totaled 28.8 million bushels over the same period, with barley exports reaching 11.8 million bushels.
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 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.
Argentina is the world’s No. 2 corn exporter and is a top seller of other commodities including soybeans and soymeal.
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.
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.
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 had managed money spec traders as 28,376 contracts more net long through the week that ended 8/23. That came mostly via short covering, with an extra 7.9k new longs added.
- Commercial traders reduced their end user long hedges by 19.6k contracts while they buffed their short by 25.2k contracts. That extended their net short by nearly 44.8k contracts to 428,404 contracts.
Commodity Round Up
- The Bloomberg Commodities Index gained 1.9% (up 25.6% y-t-d).
- Spot Gold slipped 0.5% to $1,738 (down 5.0%).
- Silver declined 0.8% to $18.90 (down 18.9%).
- WTI crude rallied $2.29 to $93.06 (up 23.7%).
- Gasoline sank 5.5% (up 28%),
- Natural Gas slipped 0.4% to $9.30 (up 149%).
- Copper increased 0.7% (down 17%).
- Wheat recovered 4.4% (up 5%),
- Corn surged 6.6% (up 12%).
- Bitcoin fell $620, or 2.9%, this week to $20,658 (down 55%).
From The TradersCommunity Research Desk