Canada Markets

For those questioning corn's ability to maintain current price levels -- let alone rally further from here -- the USDA weekly export sales report continues to feed the bulls. Given the lack of meaningful competition worldwide as pointed out previously in "Why 18-Year-Low Ending Stocks in Corn Exporting Countries Should Be on Everyone's Radar," https://www.dtnpf.com/…, more of the same could be expected.

Total commitments for corn (outstanding sales plus accumulated exports) are currently 28% ahead of last year at this stage of the marketing year. Accumulated exports alone stand at 30.7% above last year's pace, both compared to a 6.9% annual increase in corn exports currently projected by the USDA.

Frontloading of sales is the most commonly heard excuse but there really are very few alternatives for importing countries to turn to until the second-crop (safrinha) corn is harvested in Brazil. That's the corn crop that is having a hard time getting planted due to delayed seeding last fall (drought), then delayed harvest currently (excess rainfall) of the soybean crop that's in its way.

The accompanying chart displays the current USDA projection for 2024 in green of 2.45 billion bushels (bb) and the outcome should the final export total be 20% higher than last year in orange, 2.75 bb. The latter would still represent quite a slowing from the current pace, requiring export sales for the remainder of the crop year to fall below last year's levels. As pointed out, that may be hard to accomplish.

If the final export total is 20% above 2023-24, it would just barely mark a new record high level and result in a 300-million-bushel (mb) increase in total corn exports. Should Feed & Residual and Ethanol use remain as they currently are, given exceptional profitability and the strong pace to date, respectively, ending stocks would fall to 1.240 bb from the current estimate of 1.540 bb. The last time ending stocks fell to that level (1.235 bb) was the 2020-21 crop year, setting the stage for an eventual rally to $7.35 per bushel (bu) set during the first week of May 2021.

As a refresher from the January World Agricultural Supply and Demand Estimates (WASDE) report, major exporting countries (Argentina, Brazil, Russia, South Africa and Ukraine) combined are expected to hold 8.04 million metric tons (mmt)of corn at the end of 2024-25. That is down sharply from 16.06 mmt the previous year and 56.5% below the 18.47 mmt remaining at the end of 2022-23. Stocks-to-use ratios paint a similar picture at 6.08% for 2024-25 versus 12.62% the previous year and 15.35% in 2022-23. You have to go back to 2006-07's 6.497 mmt to find tighter ending stocks -- but interestingly, not stocks to use -- at 9.8% that year, given the lower level of use. All suggest little need for the U.S. to be an aggressively motivated seller (regarding the need for price to fall).

It is worth noting that record 2024-25 production totals for Argentina and Brazil are factored into the estimates with those already appearing to be at risk. The Buenos Aires Grains Exchange has already lowered its corn production estimate to 49 mmt from USDA's 51 mmt projection due to drought impacts. Brazil's corn production estimates have not changed with the second (safrinha) crop not even 10% planted yet, but that already leaves a greater-than-normal portion of the crop pollinating in a traditionally stressful period of heat and dryness.

For major importing areas (Egypt, European Union, Japan, Mexico, Southeast Asia and South Korea), the story is not much more comforting. On a combined basis, they have allowed their ending stocks to shrink to the lowest level since 2012-23. At an estimated 18.85 mmt for 2024-25 compared to 20.57 mmt the previous year, and 20.78 mmt for 2022-23, the changes aren't as dramatic but still noteworthy. For comparison's sake, the 20-year high was 22.972 mmt set in 2015-16, while the low was 12.716 mmt set in 2012-13. Again, more of a motivated group should food security become an issue.

The greatest headwind for the corn market is arguably the size of the net-long position commodity index traders and money managers have already accumulated. According to the Commitments of Traders data, the managed-money traders group has already reached 350,721 contracts (1.754 bb) net long as of Jan. 28. The record net long was 429,189 contracts set September 2010.

Commodity index traders have been buying as a hedge against inflation since August with the pace accelerating in January. They have accumulated a net-long position of 470,391 contracts (2.352 bb) as of Jan. 28. Their record-high position of 493,736 contracts was set in April 2024.

Technically speaking, the March contract is at an important level of $5/bushel. That was the 2021 low, marking previous support -- now resistance and an important level to surpass for the bulls. The weekly chart has turned bullish on a variety of indicators with a close over the 100-week moving average a positive sign. Should the rally continue, the next resistance levels lie at $5.50/bu, then $5.72/bu and $6.30/bu.

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I welcome feedback along with any suggestions for future blogs. My daily comments can be found in Plains, Prairies Opening Comments and Plains, Prairies Quick Takes on DTN products.

Mitch Miller can be reached at mitchmiller.dtn@gmail.com

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