CBOT corn futures have retreated 10% off their 8-year highs since the USDA’s May WASDE report. But Gro believes the fundamentals for a tight corn market are every bit still in place today.
Futures prices regained some ground on Thursday, with the July contract gaining nearly 1% and the December contract up more than 2%.
Demand for corn remains strong with cash corn prices in the world’s top suppliers at or near a record high in the US and Brazil, while cash prices in China, representing today’s dominant demand market, also remain elevated.
Gro’s Brazil Corn Yield Forecast Model shows Brazilian corn production remains a concern with above-normal temperatures and lack of rain, as reflected in Gro’s Drought Index. A weak corn crop in Brazil, the No. 2 exporter, would put increased pressure on already tight US supplies.
As crop estimates for Brazil have fallen, China has accelerated purchases of US new crop corn, pushing new crop US corn sales to a record high as of mid-May. Corn demand for ethanol production also has stepped up, and last week reached the highest level in more than a year.
Ahead of the WASDE report, managed money held the largest net long position in corn in over a decade. Gro suggests that the drop in CBOT corn futures prices came as money managers repositioned their portfolios and took profits, particularly after the USDA forecast higher-than-expected corn ending stocks for 2021/22. But Gro forecasts indicate that the USDA continues to underestimate corn demand, particularly for exports and for ethanol, and that corn supplies remain as tight as ever.
Market focus will shift to new crop supply. With over 80% of the corn crop planted in the US, traders are watching weather forecasts in search of much-needed rain in key areas, as shown by the Gro Drought Index. Gro’s in-season US Corn Yield Forecast Model will provide great insight on US available supply.
This insight was powered by the Gro platform, which enables better and faster decisions about factors affecting the entire global agricultural ecosystem. Gro organizes over 40,000 datasets from sources around the world into a unified ontology, which allows users to derive valuable insights such as this one. You can explore the data available on Gro with a free account, or please get in touch if you would like to learn more about a specific crop, region, or business issue.