Corn Steady on Thursday Morning

Corn futures saw gains on Wednesday, driven by a weaker US dollar and a rebound in ethanol production, with the front month national average cash price rising $0.0675 to $4.3475. The EIA's weekly report indicated a 43,000 barrel per day increase in ethanol production, reaching 1.036 million bpd, and a 501,000 barrel draw in ethanol stocks. Export sales are projected between 0.7 to 1.6 MMT for old crop and 50,000 to 500,000 MT for new crop, while Agroconsult estimates Brazil's second corn crop at 112.9 MMT, significantly higher than CONAB's 99.8 MMT estimate.

Analysis

Corn is exhibiting fractionally mixed trading on Thursday morning after futures posted gains of 6 to 7.5 cents across most contracts on Wednesday, supported by a weakening US dollar index and a notable rebound in ethanol production; for instance, July 25 Corn, which closed up 6.5 cents at $4.61, was up a further 0.5 cents in early Thursday trading, while September 25 Corn, up 7.5 cents to $4.42 3/4 on Wednesday, was down 0.25 cents. The CmdtyView national average Cash Corn price also reflected Wednesday's strength, increasing by 6.75 cents to $4.3475. Data from the Energy Information Administration (EIA) for the week ending May 16th showed ethanol production increasing by 43,000 barrels per day to 1.036 million bpd, indicating robust domestic demand for corn. Concurrently, ethanol stocks decreased by 501,000 barrels to 24.944 million barrels, with a significant draw of 809,000 barrels in Midwest stocks, further underscoring strong current consumption, even as refiner inputs of ethanol saw a slight dip of 10,000 bpd. Preliminary open interest rose by 4,587 contracts on Wednesday, suggesting increased market participation. Looking ahead, the market anticipates Thursday’s Export Sales report, with old crop sales for the week of May 15 expected between 0.7 to 1.6 MMT and new crop sales between 50,000 to 500,000 MT. A significant counterpoint to domestic strength comes from Brazil, where private firm Agroconsult estimates the second corn crop at 112.9 MMT, substantially higher than CONAB's recent estimate of 99.8 MMT, potentially implying greater global supply and contributing to the current mixed market sentiment.

Key Decisions for Investors

• Investors should closely monitor the upcoming Export Sales report for indications of demand strength, especially for old crop corn, which could validate the bullish signals from the ethanol sector.
• The substantial discrepancy between Agroconsult's and CONAB's Brazilian second corn crop estimates introduces significant uncertainty; confirmation of a larger Brazilian harvest could exert downward pressure on prices, offsetting domestic bullish factors.
• Given the mixed signals of strong domestic ethanol demand versus potentially larger South American supply, traders should exercise caution and assess the evolving balance of these factors before making significant allocation changes.