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Market Analysis

The corn market’s focus will be split between the USDA’s quarterly stocks report & 2022’s US acreage update when both are released on June 30. New-crop plantings always get plenty of attention, but this year’s strong recovery in ethanol production & solid overseas demand has provided support to this major US feed grain. The Black Sea conflict & the post-Covid era have also firmed corn’s value this past spring. Domestically, higher feeding costs have hurt red meat profitability & bird flu has reduced US poultry numbers. However, reduced availability of other feed grains & wheat has likely kept corn in most US rations.

With the Covid pandemic winding down, US ethanol demand has rebounded to its highest level in 4 years. Ethanol production rose 4% to 3.88 billion gallons this past quarter as numerous workers returned to their offices. Overall, corn’s food, seed & industrial (ethanol) demand is likely to strengthen to 1.745 billion bu., the strongest quarterly level since 2018. Given the US desire to stretch their legs, this summer’s vacation driving should keep corn’s fuel demand strong despite the current record gas prices.

Without China’s huge US corn exports during 2021’s 3^rd quarter when they were recovering from ASF, exports have slipped from 2021. However, last quarter’s shipments were the 3rd highest ever at 840 million bu. Last year’s Canadian Prairie drought has dramatically jumped truck shipments across the border this year. Interestingly, corn exports only need to be 535 million to reach the USDA’s final forecast. This would be below the last 2 year’s summer exports.

Corn’s feed demand is quantified by comparing corn’s quarterly stocks from one quarter to the next. Spring hog & poultry numbers were lower because of low pork prices & an avian flu cutting numbers. Feedlot cattle numbers were near 2021’s levels. However, high wheat prices & curtailed US supplies likely kept corn in many rations. Last quarter’s feed demand was at 855 million bu, down 2% from 2021. Overall, June’s US corn stocks are projected at 4.417 billion bu, a jump from 2021 but 2^nd smallest since 2014.

What’s Ahead:

June’s stock report will be checked on the remaining 2021/22 US corn supplies to finish the crop year. However, the market has been fixated on the possible impact of outside equity, energy and metals markets causing a US recession vs the current corn fundamentals. Given the limited rainfall in the Midwest forecasts & the current strong basis levels, hold 2021 sales at 90% & 2022/23 marketings at 25%.