** USDA confirms record 2016 US Corn harvest – 15.15 billion bushels (revised slightly lower from Nov). ** World corn carryout seen at a record high, but not quite as burdensome when compared to use. ** Argentina corn planting complete – some re-planting. Brazil already starting to plant second crop. ** Ethanol margins breakeven/worse. All livestock sectors profitable overall. ** US Corn should see continued yr/yr gains in exports. Black Sea, Arg, & US competing for biz. ** Funds leaning slightly net long corn now for the first time since summer?
Overnight, the corn market found some willing sellers after the prior day rally to the top end of the range, finishing a penny lower by the AM break. Export sales arrived in good stead, with 1.144 million metric tons of new business reported; this is the third week in a row above 1 mmt. Business was split pretty evenly between unknown, Colombia, Japan, and Taiwan, and even Morocco snuck in for a cargo. Combined sales + ship for the marketing year to date topped 40 mmt for the first time, which compares to just 24.3 mmt this time last year. There were another batch of daily sales announcements today, which should keep exports steaming ahead; 140k to unknown, 110k to Japan. Exports will remain a hot topic in the days ahead, regardless of the sales pace; US-Mexico said to re-negotiate their portion of NAFTA in May? Moving along, weather is still an influence, and we continue to view it somewhat negatively given stabilization in Argentina and continued benign weather in Brazil. Rains in early soy harvesting areas are delaying second crop planting for some. Brazil exported just 1.5 mmt of corn in January, down sharply from 4.4 mmt this time last year.
Corn continues to trade around a $3.50 to $3.70 range, albeit with some volatility. Shorts who covered near $3.55 on our recommendations are probably pretty happy? We expect an awful lot of “buy stops” were placed at last week’s high of $3.71, which would be an easy target in the interim. Look to do bearish things on a trade near $3.75, which coincides with first PriceCount objectives.
After taking Tuesday off, the funds came to play in the corn market Wednesday. Futures were a little softer overnight, and much to the surprise of many, the corn market melted up gradually throughout the day, ultimately closing 8-9 cents better by days’ end. Managed Money were viewed net buyers of upwards of 15,000 contracts, which would leave them close to 25,000 contracts net long. Cash markets are weak to start the day, as merchandisers brace for another tranche of farmer sales. The weekly EIA ethanol report had some feature, unexpectedly finding a new record high on production. Production jumped nearly 1% to a new record high level above 1.061 mil bbl/day; by way of comparison, we were expecting a 1% decline. We would expect this to be the high for at least the next four to five months? Carried forward, such a rate would imply a corn ethanol grind just over 5.8 billion bushels/yr, which is quite remarkable. Given the prospects of reduced output ahead, we still feel comfortable forecasting the full year ethanol grind between 5.35 and 5.40 billion bushels. Ethanol futures closed near unch’ed vs. the higher corn board, which sank the crush back down to near recent lows. We view industry margins at breakeven to slightly worse on average across the Midwest, when including all costs.
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