Market Analysis

The corn market’s focus will be split on June 30, between the USDA’s quarterly stocks report and 2021’s US acreage update, when both are released on that day. New-crop plantings always get plenty of attention, but the impact of this year’s strong overseas demand and recovering biofuel driving demand as the US COVID pandemic wanes look impressive. However, higher feeding costs reducing profitability & smaller livestock numbers has the trade anticipating a yearly decline in corn’s feed demand this past spring.

After 2020’s sharp quarterly drop in US energy demand because of the stay-at-home orders from the pandemic, America’s ethanol output has rebounded 33% over last spring’s total output to 89.5 billion barrels. This is highest quarterly output since the pandemic began. Overall, ethanol’s 3rd quarter corn usage appears to be 1.25 billion bu with a better-quality crop improving this year’s ethanol conversion rate. This summer’s US driving level will determine if this demand will be adjusted higher later this year.

China’s massive US corn purchases as they rebuild their pork production after ASF has pushed 2021’s US 3rd quarter exports to 1.036 billion bu., up 71% & a new quarterly record. Brazil’s late season dryness hurting their 2nd crop has also added to demand. Brazil’s poor weather has many S American analysts projecting a total crop of 90-92 mmt when their 2nd harvest begins next month. Brazil’s output will have a big impact on the US 2021/22 export potential.

Since corn is fed both on and off-the-farm, this important domestic demand can only be quantified by comparing corn’s quarterly stocks levels from one quarter to the next. Hog and poultry numbers slipped this past quarter, but cattle numbers rose as feeders moved from wheat & declining Plains pastures to feedlots.

Reports of a sharp pick-up in feedlot wheat purchases because of wheat’s price discount to corn and a smaller hog slaughter has us expecting 900 million bu 3rd quarter feed level, down from 2020’s 990 million level. Overall, June’s US corn stocks are expected to be 4.132 billion bu., the smallest in 7 years (CORN, WEAT) .

What’s Ahead:

The upcoming stock report will be another check on the size of 2020/21 US corn crop if its been overestimated. However, the market is fixated on the corn’s US 2021 size even if it is unknown for another 4-6 weeks.

With US weather models moving the upcoming heavy rainfall past the Missouri River, use current strong basis levels to finalize last 5-10% of 2020 corn sales. Hold 2021/22 sales at 20-25%.