Corn futures have floated between $3.60 and $3.70 since mid-September. That is, until last Thursday. See the March prices below from Barchart.com.
The big news from the release was the increase in corn yields expected in the U.S. to 175.4 bushels/acre, a record yield if it verifies. Another record of 14.78 billion bushels was also forecast. Prices dropped 7 cents on the day of the report. This was a surprise. Just a few months ago there was strong concern over the drier weather in June and July. It appears corn was resilient and there was relatively no damage. As you see in the chart, prices continued to fall this week. Focus has now shifted to South America.
It has been a good start to the crop season so far. Rainfall has been above normal for most of the areas. The forecast for the next seven days continues to show ample moisture in Sao Paulo, Mato Grosso and Minas Gerais. This comes during a very important time in the crop growing cycle.
Argentina rainfall can slip during La Nina years, but otherwise there isn’t much worry in SA weather. Another great SA crop will limit any concerns on the supply side. Therefore, any rise in corn prices will likely come from the demand side. Such an increase could stem from continued evolution in tastes, as diets in Latin America and Asia have been “westernizing” in recent years. In addition, upward price activity in the energy markets could boost ethanol demand, thus helping to firm the corn market.
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