Fundamentally Speaking

In the June WASDE report, the USDA increased its export projection for U.S. corn by 50 million bushels (mb) to 2.650 billion bushels (bb), reducing ending stocks for both this year and next by a similar 50 mb.

Yet the market has given this news a collective snore as the September 2025 contract has established new contract lows this week.

We have noted before in prior blogs, despite falling estimates of U.S. corn stockpiles throughout this marketing year, corn values both on a flat price and spread basis have continued to weaken as the bullish old crop demand fundamentals for the most part are being ignored.

The market instead is choosing to focus on the prospect of record U.S. corn output this coming fall that should boost ending stocks to more comfortable levels.

This chart tracks the price change in the July-December corn spread from January 1 to June 1 in $/bushel on the left-hand axis.

Reported on the right-hand axis is the change in the old crop corn stocks-to-use ratio from January to the June WASDE report and the change from last June to this year's June figure.

The figures in the yellow boxes are the second June WASDE corn stocks-to-use projection.

At the start of the year, the July 2025 corn contract was 25 cents premium to the December 2025 contract but by June 1 it was just 5 1/2 cents over, a drop of 19 1/2 cents.

This is the largest drop in the CN-CZ spread in these five months since 2012 and the second largest since 2007.

This comes at a time when old crop corn stocks have fallen quite dramatically over the past number of months triggered for the most part by rising export projections.

Back in January, the 2024/25 U.S. corn stocks to use ratio was pegged at 10.2% but earlier this month the USDA put it at 8.9%, a decline of 1.3%.

This is down a substantial 5.3% from the second USDA projection of this year's stock/use ratio given in the June 2024 WASDE report of 14.2%.

Often when the stocks-to-use ratio declines, this results in the old crop corn contract (which is July) increasing relative to the new crop corn contract (which is December) as this signifies a tightening of stocks.

Prior to this season, the largest Jan-June and June-June declines in stocks-to-use ratios were in 2021 of 3.2% and 15.1% respectively as the July-December 2021 corn spread inverted by 66 cents between Jan 1 and June 1.

This is not the case this year or even last year, an indication that the trade feels supplies will be more than adequate from now until this year's harvest starts where the USDA is forecasting both record yields and production.

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