Corn market keeps booming prior to report

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sun in corn field
(Metro Creative Services photo)

A market letter I read over the weekend reminded me that we had made five life-of-contract highs in March corn futures in eight sessions.

Then, Feb. 8 came and we did it again! And on Feb. 9 we repeated. March corn futures hit $5.653⁄4 Feb. 8, and then $5.703⁄4 the morning of Feb. 9. This is a market that is still ticking, for all the reasons I mentioned in this space last week.

The perception of the market is that there is not enough corn to get us through the year, especially with the current export pace that is ahead of U.S. Department of Agriculture (USDA) projections.

Bullish

Adding to market hype this week is the USDA monthly supply and demand report that was to come out Feb. 10. By the time this is read, we will know the contents of that report. Suffice it to say, the market action Feb. 9 suggested that traders expect it to be bullish to prices.

It is unusual that the day before report day is bullish. Normally any bullish enthusiasm is expressed in the days leading up to a report, and then the day before is rather quiet as traders adjust positions and wait for the report.

That was not the case this time. Traders were talking up a cut in the carryout numbers for corn and beans. The last report had corn carryout as of Aug. 31, 2021, at 1.55 billion bushels.

Low on corn

In today’s world, one billion is considered pipeline supply, and the same as running out. The concept of pipeline supply is that little amount that is left in the bottom of every bin, and in every conveyor, and in transit to end-users, etc.

Traders were talking up carryout numbers as low as 1.2 billion Feb. 9, and a common number is 1.35 billion bushels. Then, they were saying that is the fact, but USDA might not lower it that much.

We were back to analysts giving two numbers: their estimate of fact, and their estimate of what USDA will report. Previous digestions of USDA numbers have analysts saying that the livestock industry will slow down usage, mostly because of high prices.

The other thought is that the exports will slow because of the high prices. It is also thought that the ethanol grind will be greater than the current USDA estimate, especially as driving will continue to return to near normal as the pandemic recedes and pent-up demand to drive is satisfied.

Eventually, consumers will return to restaurants and vacation spots and make up for the lost time reflected in stay-at-home orders.

No slow down

So far, there is no indication that this slowing of demand is happening. In a year in which we need to ration demand with higher prices to get through the summer, we do not seem to be doing the rationing.

Additionally, corn needs to “buy” acres in completion with soybeans. Each commodity “needs” to see planted acres of 91 million acres, a total we have never seen before. This, because we are exporting at a rate that is unsustainable.

First, we used up our soybeans, and now the market is focusing on potentially using up corn supplies. Frequently market reactions are credited to the actions of the large speculator funds.

Those positions are reported, by regulation, to the Commodity Futures Trading Commission and reported on Friday. So, the specs have been liquidating their long positions over the last three weeks, but the market continues higher on the buying of exporters and processors.

Looking at a little recent history, the March corn futures contract has gained over 78 cents since the last dip, to $4.921⁄2 on Jan. 25. March soybean futures, which for once is not leading the charge higher, lost $1.381⁄2 between the recent high of $14.361⁄2 Jan. 13 and the $12.98 dip Jan. 25.

Since then soybean prices have been higher, but not near the contract high, as it is corn which is the new leader.

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