Corn Sneaking Out Gains on Thursday Morning

Corn futures are trading higher this morning, following gains on Wednesday driven by bear spreading as July contracts decline and September/December contracts increase. Ethanol production surged to mid-March highs, reaching 1.105 million barrels per day, while exports also saw an 8-week high; meanwhile, a South Korean importer tendered for 210,000 MT of corn and Brazilian export estimates for June are down year-over-year.

Analysis

The corn market is exhibiting upward momentum, with futures gaining 1 to 2 ¼ cents in Thursday morning trade, extending Wednesday's fractional to 5 1/4 cent gains. This price action is influenced by bear spreading, evidenced by a significant decrease of 12,074 contracts in July open interest, while September and December contracts saw respective increases of 4,852 and 2,342 contracts. The CmdtyView national average cash corn price rose by 1/4 cent to $4.14 1/4. Strong demand signals are emerging from the ethanol sector, as EIA data revealed weekly ethanol production surged by 49,000 barrels per day (bpd) to 1.105 million bpd, matching mid-March highs. Concurrently, ethanol exports jumped 84,000 bpd to an 8-week high of 150,000 bpd, despite a 37,000 bpd drop in refiner inputs and a marginal 159,000 barrel increase in stocks to 24.44 million barrels. International demand is further underscored by a South Korean importer tendering for 210,000 metric tons (MT) of corn. Anticipation is building for export sales data, with traders expecting 0.775 to 1.4 MMT in old crop sales and 20,000 to 250,000 MT for new crop. Conversely, ANEC's estimate for Brazilian corn exports in June at 835,660 MT is notably below the 982,812 MT exported in June of the previous year, potentially tightening global supply. These factors contributed to July corn closing at $4.38 3/4 (up 1/4 cent), September at $4.28 (up 4 1/2 cents), and December at $4.43 3/4 (up 5 1/4 cents), with new crop cash up 5 cents to $4.00 3/8.

Key Decisions for Investors

• Monitor upcoming export sales data closely, as confirmation of strong old crop demand (0.775-1.4 MMT expected) and new crop bookings could provide further support to prices, particularly in deferred contracts.
• Consider the implications of robust ethanol production (1.105 million bpd) and significantly higher ethanol exports (150,000 bpd), which suggest strong domestic and international demand for corn as a feedstock.
• Evaluate positions in light of the ongoing bear spreading, where selling pressure in the front-month July contract contrasts with buying in September and December, and assess the potential for continued strength in new crop futures given lower Brazilian export projections and active international tenders.