Corn Market Faces Weather Uncertainties

U.S. corn futures stabilized after a recent rally driven by concerns of hot and dry weather affecting harvests. Dry conditions in key areas of the U.S. Midwest raised worries about corn supply, leading to increased buying activity. The U.S. Department of Agriculture (USDA) reported significant drops in crop ratings, particularly in top-producing states like Iowa and Illinois, where a deepening drought was impacting crop ratings.

The Biden administration announced plans to raise biofuel blending requirements for oil refiners in the coming years. However, the initial proposal included lower mandates for corn-based ethanol than expected. Meanwhile, United Nations Secretary-General Antonio Guterres called for an acceleration of Black Sea grain shipments from Ukrainian ports due to concerns over Russia potentially leaving the export agreement.

Market analyst predicted a decline in yield and export demand for the U.S. corn crop this year. Dry weather conditions could prompt the USDA to reduce its yield forecast. While China would rely more on South America for corn imports until the U.S. harvest begins.

In terms of current conditions, corn prices were mixed, with some areas experiencing potential stress due to the weather. The crop's overall rating declined compared to the previous week, and it was anticipated that this year's corn crop would not reach record levels due to the ongoing drought. Some frost was reported in parts of Brazil, but it did not significantly impact the second crop. China's corn imports from the US decreased compared to last year, with most supplies coming from Ukraine. The European Union also adjusted its yield estimate for the bloc's corn crop.

The USDA's outlook for the 2023/24 U.S. corn market showed few changes from the previous month, with increases in both beginning and ending stocks. Corn area and yield forecasts remained unchanged. The forecast reflected a decline in exports for the current year, offset partially by lower imports. Ending stocks were raised due to no changes in supply or use. The average farm price remained unchanged at $4.80 per bushel.

Global corn production was expected to be higher, with increased production, trade, and ending stocks compared to the previous month. Major shifts are occurring in the global corn trade for 2023/24. Ukraine will export more corn, while the EU increases imports. However, Argentina and the US are reducing corn exports, while Ukraine, Brazil, and South Africa are expanding theirs. Foreign corn ending stocks are relatively stable, with increases in Paraguay and Zambia and reductions in Mexico and South Africa.

On the other side, Zimbabwe was projected to produce slightly more corn in 2023/24, but it would still need to import half a million tons to meet domestic demand. The country faced challenges in optimizing corn production due to economic issues, high input costs, infrastructure constraints, and restrictions on genetically engineered seeds. Human consumption was expected to remain steady, while corn for feed would increase due to growth in the poultry industry. South Africa was likely to be the primary source of corn imports for Zimbabwe, as it had a surplus available for export.

Overall, the corn market faced uncertainties due to weather conditions, export demands, and global production trends. The impact of these factors on prices and supply varied across regions.

Data for Technical Analysis (1H)

Resistance : 625.71, 626.57, 627.95

Support : 622.95, 622.09, 620.71                           

1H Outlook

Source: Investing.com                      

Buy/Long 1 If the support at the price range 621.45 - 622.95 is touched, but the support at 622.95 cannot be broken, the TP may be set around 625.78 and the SL around 620.95, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 625.71 - 626.21, TP may be set around 627.95 and SL around 622.45, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 625.71 - 626.21 is touched, but the resistance at 625.71 cannot be broken, the TP may be set around 622.16 and the SL around 626.71, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 621.45 - 622.95, TP may be set around 620.71 and SL around 626.20, or up to the risk appetite.       

Pivot Points Jun 22, 2023 01:32AM GMT

Sources: Brownfield Ag News, ZAWYA