** 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. ** South American spring corn planting complete in Brazil, over 90% planted in Argentina. ** Ethanol margins 5-10 c/gal positive. Livestock sector slightly profitable overall. ** US Corn should see continued yr/yr gains in exports. Black Sea, Arg, & US competing for biz. ** Funds leaning about 60,000 contracts net short corn.
Overnight, corn trade was very quiet, generally maintaining a slightly weaker bias in sympathy with beans, but ended up closing near unchanged. Weekly Export Sales were as good as could be expected given the recent upswing of daily sales announcements. Net new business of 1.368 million metric tons included a lot of the usual players – Japan, Taiwan, Mexico, etc. The level takes sales + ship for the year to date to 37.7 mmt vs. 22.3 mmt this time last year. Right on cue, shortly after the release of the report, the USDA found another two cargos of US corn sold to “unknown” buyers, which should contribute to another good report next week. Some of the recent US bookings may represent “hedges” against potential Argentine flood losses? On that subject, Argentina appears to be receiving the expected ~ten days of warm/dry weather, which should help things dry down and give folks on the ground a chance to assess damage. Brazil conditions remain quite favorable, and we are quite frankly running out of time to hurt the first/summer crops. RGDS province reported 15% of the corn crop had been harvested, which compared to 12% average. South Africa gearing up for a return to more “normal” production levels in corn after two years of harsh drought.
Interesting start to the week, with corn finally breaking a two-month-long trend of “lower highs”. A broad resistance shelf extending up to $3.70 has stifled rallies since October, and one has to take a slightly cautious stance at chasing rallies given that fact. Still, there are multiple technical buy signals flashing in corn for the moment, which hints at least at some potential to see higher values ($3.85?). We would expect the market to continue to find commercial buying in the low $3.50’s for now, with minor, initial, support viewed at $3.60 CH for the moment.
The corn market featured a “start lower, end higher,” trade Thursday, but did so in rather undramatic fashion with a penny higher close. Futures felt heavy early in the day, managed to shake off the rust, but were met with more selling near the prior day’s high. Managed Money funds were viewed net buyers of about 5,000 corn, which would pare their net short to around 55,000. Cash trade was mostly steady, with the exception of the PNW, which remains volatile due to rail freight disruptions. The weekly EIA report offered some surprises to ethanol traders. Run rates were boosted another 0.5%, marking a new record high production level for the industry. If such rates were carried forward (and they almost certainly will not), it would imply a corn ethanol grind of over 5.6 billion bushels. The downtrend in the ethanol crush over the past thirty days has led to a much more variable margin environment. We would estimate roughly 25% of the ethanol industry is likely losing some money today (mostly in the East). Another 25% is close to breakeven, while the remaining 50% are earning closer to 5c/gal (10-15 c/bu) profits. Fortunately for corn demand, livestock producer margins have been trending up over the past couple of months, and nearly all sectors are able to make money.
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