Brazil Dryness Helps July Corn Top $7

Corn's Bullish Tone Continues With $7 Contract Highs

Corn prices continue to vault higher with reports out of Brazil that areas key to the safrinha corn crop are dry. Lower production forecasts for Brazil continue to push future prices up. (DTN file photo)

OMAHA (DTN) -- The corn market continues to find new heights as reports that Brazil's second-crop (safrinha) corn is parched helped drive the May and July corn contracts up, with the July contract hitting $7.04 a bushel Tuesday, the highest since 2013.

July corn was up 17 1/4 cents a bushel on Tuesday, settling at $6.96 3/4, with the May contract settling at $7.44 3/4.

Much of the recent surge in corn prices has been sparked by declining estimates of Brazil's corn crop. Brazil's central safrinha corn areas look to remain dry for at least the next 10 days with above-normal temperatures, further compromising corn yields during pollination. Stone X, formerly known as FC Stone, is the latest to drop Brazil's total corn production estimate. Stone X pegs the crop at 100.25 million metric tons (mmt), or 3.95 billion bushels (bb) -- 8.75 mmt lower than the April World Agricultural Supply and Demand Estimates (WASDE) projection. Estimates from Ag Resource are pessimistic on the safrinha crop, coming in at 69.8 mmt (2.74 bb), compared to Brazil's National Agricultural company CONAB at 82.6 mmt (3.25 bb).

"The forecast looks bleak as far as moisture goes, and they are experiencing above-normal temperatures," said DTN Lead Analyst Todd Hultman. "So, it's about as bullish of a forecast as you can get for a big crop heading into pollination time."

Cash bids in the Texas Panhandle are now pushing $8 a bushel as feeders compete for grain. In the Western Corn Belt, cash prices are above $7 a bushel, especially at ethanol plants.

"Ethanol prices are staying high, and they are somewhat rallying with corn," Hultman said. "So, the markets are staying healthy to keep the ethanol going. So, the demand is strong to keep producing ethanol."

Hultman noted the ethanol and renewable identification number (RIN) prices continue to strengthen. The ethanol cash price has gone up 92 cents a gallon since January, to $2.47 now, and is running higher than gasoline. In the compliance market, 2020 D6 RINS have doubled since the beginning of the year to $1.59 each.

The weather issue in Brazil has placed even more importance on U.S. new-crop corn production. Corn planting in the U.S. jumped by 29 points in the past week to 46% complete. That is one of the fastest weekly gains on record and is 10 points ahead of average. Key corn-producing states Iowa and Minnesota were far above average at 69% and 60% planted, respectively, compared to their averages of 45% and 32%. Emergence on corn at 8% is close to average.

Many in the trade believe final plantings are apt to be much higher than the March intentions. Last week's export inspections of 84.2 million bushels (mb) was a marketing-year high; China was the primary destination with Japan second. More positive news came from the Census Bureau, indicating U.S. ethanol exports in March were 133 million gallons compared to just 101.7 million in February. China imported 48.3 million gallons of that; for the first three months, China took 75.7 million gallons, the most since 2016. Ethanol domestic demand is expected to ramp up even further as cities reopen. The corn basis continues very stout as end users fight for supplies from tight-fisted producers. Funds came into Tuesday long an estimated 360,000 contracts and likely added to that bullish bet on Tuesday. DTN's National Corn Index closed at $6.94 Monday evening, 15 cents over the July contract.

DTN's Cash Market Moves column also looks at corn basis hitting levels not seen since 2013:

https://www.dtnpf.com/….

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow him on Twitter @ToddHultman1

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter #ChrisClaytonDTN