Corn Pushing Weakness to Wednesday AM Trade

Corn futures are experiencing downward pressure, extending recent losses, driven by increased open interest indicating net new selling. Domestic factors include a month-over-month rise in May corn usage for ethanol production, though still down year-over-year, and beneficial rainfall forecasts across parts of the Corn Belt. Globally, mixed signals persist with Ukraine's 2024/25 export estimate significantly reduced, while Brazil's production forecast was raised, although its near-term export outlook was lowered, collectively contributing to the current bearish sentiment.

Analysis

Corn futures are exhibiting bearish momentum, evidenced by price declines of 3 to 4 cents and a significant 24,013 contract increase in preliminary open interest, which suggests an influx of net new selling. This negative sentiment is reinforced by favorable weather forecasts from NOAA, promising up to 1.5 inches of rain across key U.S. Corn Belt states, potentially improving crop yields and adding to supply-side pressure. On the demand side, the data is mixed; U.S. corn usage for ethanol production rose 6.2% in May from April, but it remains 1.31% below the level of the same month last year. The global supply picture is conflicting, as a bullish reduction in Ukraine's 2024/25 export forecast to 22 MMT is being overshadowed by a bearish upward revision of Brazil's corn production estimate by StoneX to 136.1 MMT. The market is currently weighing the immediate bearish impacts of favorable weather and increased Brazilian supply more heavily than the potential future tightness from Ukraine.

Key Decisions for Investors

• Given the technical pressure from rising open interest and bearish fundamentals from favorable U.S. weather, investors should be cautious of further downside risk in corn prices in the near term.
• Traders should closely monitor the developing tension between the increased Brazilian production forecast and Ukraine's significantly curtailed export estimates, as this discrepancy will be a key driver of medium-term price direction.
• While the month-over-month increase in ethanol usage is a positive sign for domestic demand, the year-over-year decline warrants monitoring this metric closely as a potential headwind against any price recovery.