Corn Edging Higher on Thursday Morning

Corn futures are trading higher ahead of USDA reports, following fractional losses on Wednesday despite record U.S. ethanol production of 1.12 million barrels per day. Analysts anticipate the USDA will cut old crop U.S. ending stocks by 23 million bushels to 1.392 billion bushels, and new crop estimates are expected to decrease by 11 million bushels. Brazilian corn production estimates are projected to increase, with CONAB data showing a 1.38 MMT hike to 128.25 MMT.

Analysis

Corn futures are exhibiting modest pre-report strength, trading 2 to 3 cents higher following fractional to 1 ¾ cent losses in contracts on Wednesday. This prior weakness occurred despite record U.S. ethanol production, which reached 1.12 million barrels per day in the week of June 6, accompanied by a 706,000-barrel draw in ethanol stocks to 23.734 million barrels and increased ethanol exports to 151,000 barrels per day. The market anticipates key USDA data, with analysts forecasting a reduction in old crop U.S. ending stocks by 23 million bushels to 1.392 billion bushels and a decrease in the new crop estimate by 11 million bushels to 1.789 billion bushels, according to a Bloomberg survey. Conversely, Brazilian corn production estimates are trending higher; CONAB has already reported an increase of 1.38 MMT to 128.25 MMT, primarily due to a 1.2 MMT rise in the second crop estimate, while analysts project a broader increase to 131.8 MMT. Argentina's production is expected to remain stable at 49.9 MMT. The front month CmdtyView national average cash corn price recently declined by 1 ¾ cents to $4.13 1/2, while Jul 25 Corn, after closing down 1 3/4 cents at $4.37, was recently up 2 1/2 cents.

Key Decisions for Investors

• Investors should closely monitor the upcoming USDA reports as deviations from expectations for U.S. stock reductions and South American production figures will likely be key price drivers.
• Consider the conflicting pressures from anticipated tighter U.S. corn supplies versus increased Brazilian production estimates, which could lead to significant market volatility post-report.
• Evaluate whether the strong underlying support from record ethanol production and declining ethanol inventories, previously ignored by the market, will gain more influence on pricing following the USDA data release.