Corn Easing Ahead of USDA Report

Corn futures are broadly lower Friday as traders position ahead of the USDA report, despite robust export demand highlighted by old crop sales reaching an 8-week high of 1.262 MMT. A Bloomberg survey anticipates the USDA report will indicate tightening supply, with old crop stocks potentially reduced by 14 mbu and new crop production trimmed by 75 mbu due to fewer acres, which would lower new crop stock estimates to 1.721 bbu and could be price supportive.

Analysis

Corn futures are exhibiting slight price weakness, with most contracts down 1 to 2 cents as traders reduce positions ahead of a pivotal USDA report, evidenced by a 4,834 decline in preliminary open interest. This short-term price action contrasts with strong underlying fundamental signals. Export sales data for the week ending July 3 showed old crop bookings hitting an 8-week high of 1.262 MMT, more than double the prior week and the same week last year, with a significant private sale of 110,000 MT of new crop corn to unknown destinations also reported. New crop sales were also robust at 888,562 MT, the second-largest figure this year. Market anticipation, captured by a Bloomberg survey, is for the USDA to report a tightening supply situation. Projections indicate a potential 14 million bushel (mbu) reduction in old crop stocks and a 75 mbu cut to new crop production due to fewer acres, which would lower the new crop stock estimate to 1.721 billion bushels from 1.75 billion in June. This backdrop creates a tension between current pre-report profit-taking and a potentially bullish supply-demand outlook.

Key Decisions for Investors

• Investors should closely monitor the upcoming USDA report, as market prices will be highly sensitive to deviations from the consensus estimates of 1.351 billion bushels for old crop stocks and 15.746 billion bushels for new crop production.
• The robust export sales data, particularly the 8-week high in old crop bookings and strong new crop sales to key buyers like Mexico and Japan, suggests a strong demand floor that could support prices post-report.
• Given that the current price softness is coupled with a decrease in open interest, a bullish USDA report that confirms or exceeds expectations for tighter supply could trigger a sharp price rally as positions are re-established.