Corn Futures Supported by Lower Stocks and Production Among Black Sea Disruption

Corn prices corn prices rallied back Friday 1.25% to finish the week largely unchanged.  USDA reported corn stocks were 1.377 bbu on September 1st, well below the average trade estimate. USDA also revised 21/22 production 41 mbu lower to 15.074 bbu. That was exclusively through WCB revisions. Black Sea supply concerns from Putin’s annexation of regions of Ukraine threatens to export balances. 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 and March futures each added 8.5 cents to close at $6.78 and $6.8450, respectively.
  • Profit taking pulled things back down some for net gains of 5 3/4 to 8 cents Friday in old crop.
  • Corn basis bids were mostly steady across the central U.S. on Friday but did tilt as much as 5 cents higher at an Ohio elevator and as much as 10 cents lower at an Illinois river terminal today.
  • Preliminary volume estimates were for 357,527 contracts, trending well above Thursday’s final count of 267,553.

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.

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

Ethanol cash prices from USDA’s weekly review were 11 to 16 cents/gal lower through the week to $2.17 – $2.40/gal regionally.

DDGS were shown UNCH to $31/ton higher regionally from $215 to $330/ton regionally.

Europe

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

France is Europe’s top grain producer.

FranceAgriMer reported 51% of the 22/23 crop was harvested through Sep 26. That was up from 26% last week and compares to 2% at the same time last year. Rouen reported 75,700 MT of corn shipments during the week of 9/28 – a near 50% drop off compared to the week earlier. 

he drought-damaged crop is getting harvested 18 days faster than the prior five-year average. FranceAgriMer docked crop quality another two points, with 41% rated in good-to-excellent condition.

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. The Buenos Aires Grains Exchange maintained their estimate for 7.5m HA of 22/23 corn area, with planting progress 6% finished. 

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 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 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 firms were 10,055 contracts less net long on 9/27 on reduced exposure. The funds closed out 18.8k longs and 8.8k shorts for a net long of 237,854 contracts.
  • Commercials reduced short hedges and added long hedges in corn through the week, for a net 28.3k contract lighter net short of 433k contracts.

Commodity Round Up

Highlights

  • The Bloomberg Commodities Index declined 0.8% (up 12.4% y-t-d).
  • Spot Gold rallied 1.0% to $1,661 (down 9.2%).
  • Silver recovered 0.8% to $19.028 (down 18.4%).
  • WTI crude increased 75 cents to $79.49 (up 6%).
  • Gasoline surged 3.8% (up 11%),
  • Natural Gas declined 0.9% to $6.766 (up 81%).
  • Copper rallied 2.1% (down 24%).
  • Wheat surged 4.7% (up 20%),
  • Corn was little changed (up 14%).
  • Bitcoin recovered $270, or 1.4%, this week to $19,400 (down 58%).

Source: TC, USDA, Farm Progress

From The TradersCommunity Research Desk