Corn
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Summary
Ethanol production and exports are running much over USDA's current view. This balance sheet may tighten by 50 - 100 million bushels in the coming months. Though we have a light concern over Argentine dryness this is not the time of their yield determination. Traders note the possibility of corn staying within the recent two month range. Some type of psychological discount until trade policy is established is reasonable.
Market Report
Recent Export Sales: Seven amazing weeks behind us, +40% to +254% vs. the five year average. Remaining sales only need to run -14% from average to meet USDA's goal. A portion of this is likely pre-buying ahead of a change in US trade policy.
Export Sales on Tomorrow's Report: The 1.0 - 2.2 million tonne estimate range is -7% to +104% from the 1.077 five year average. There were 802,677 tonnes in overnight sales applied to this week. We'll now have eight weeks of great sales. We are +25 million bushels over USDA's whole-year goal and will likely increase that overage in the coming months.
Exports Sales on Next Week's Report: With a light note of concern, we have no overnight export sales this week. We have have one week with a miss on next week's report. The five year average for that specific week is stout, 1.536 million tonnes.
Export Narrative: We have much less export concern in corn than soybeans regarding Trump policy. In the completed old crop year we shipped China 117 million bushels. Trade policy with Mexico, our #1 corn customer, is the question. Last year we shipped them 924. At this time we have a cheaper price than Brazil. For Mexico, we believe they end up buying near last year's record level.
Corn for Ethanol: The second area of positive corn demand is with ethanol. USDA's goal for the year is -0.5% from last year. Today's weekly report, 1.110 million barrels per day, is a large +8.5% from last year. This was the second largest weekly run of all time. This marketing year has 11 weeks complete. The pace so far is +3.8% from last year. If remaining production is +1% over last year, we'll exceed USDA's goal by +83 million bushels. A +2% pace equals +138 million bushels. A +3% pace from here on out equals +192 million bushels. Allendale is now +50 million bushels vs. USDA's goal.
South American Narrative: Brazil weather is okay. Yield determination for the small 1st crop is in January. Argentina is lightly dry. Yield determination is January/February.
Brazilian rains, for 1st crop corn areas, slipped to 0.4 inch last week. That was under the 1.3 norm. Two week rains ahead though, are quite strong at 2.7 - 4.7 inches. The average for those two weeks is 2.6.
Argentine rains last week slipped to 0.4 inch. That was under the norm of 1.0. Over the coming two weeks 1.6 - 4.3 is currently forecast. The average for this time is 2.0.
Cash Corn: US corn basis continues to appreciate. The current -0.27 per bushel reading as of November 15 is well off the seasonal low this harvest at -0.43. Even in heavy supply years there is typically another 0.15 of improvement into December.
Pricing: USDA has ending stocks at 1.938 billion bushels, Allendale 1.862. If there was no psychological trade war discount a 2.0 billion bushel ending stock would suggest 460 futures, 1.9 equals 475 and 1.8 equals 500. For the weeks ahead, until trade policy is clarified, expect an artificial discount to economic value.
Chart: From the major low of 403 ¾ from 8/26 March corn has posted a moderate uptrend. Support for this uptrend is the trendline down at 420. Bulls hope for a test of current resistance, the medium term downtrend at 446.
