Corn Market Downturn Amidst Global Shifts and Lower Costs

The corn market recently witnessed a downturn driven by profit-taking and technical selling. Of particular concern are the soybean planting delays in Brazil, which could potentially impact second crop corn planting. The market is closely monitoring weather forecasts, with hopes that rains in dry areas could expedite activity.

Conditions have improved in parts of Argentina due to recent rainfall, and attention is now focused on the tail end of the U.S. harvest activity. Japan's consistent purchase of 124,000 tons of U.S. corn for three consecutive days has been noteworthy. In addition, the U.S. Energy Information Administration reported a rise in ethanol production, contributing to increased corn usage.

The latest 2023/24 U.S. corn outlook depicts a scenario of larger production, domestic use, exports, and ending stocks. Corn production is forecasted to increase from the previous month, with this uptick attributed to a rise in yield per acre. With larger supplies, feed and residual use is raised by 50 million bushels, and corn used for ethanol is increased by 25 million bushels. Exports are also raised by 50 million bushels. Despite the increased supply, corn ending stocks are up by 45 million bushels. The season-average corn price received by producers is lowered by 10 cents to $4.85 per bushel.

Globally, coarse grain production for 2023/24 is expected to increase by 4.8 million tons. The foreign coarse grain outlook for the same period indicates larger production, trade, and ending stocks compared to the previous month. Foreign corn production is forecasted to rise, with increases for Ukraine, Russia, Burma, and Paraguay, partially offset by declines for Mexico, Egypt, and Indonesia. Major changes in global trade include larger corn exports for the United States, Russia, Turkey, Ukraine, and Paraguay. Corn imports are raised for Canada, Egypt, Mexico, the EU, and Saudi Arabia but lowered for Iran and Bangladesh. Foreign corn ending stocks are higher, reflecting increases for Ukraine, Paraguay, and China, offset by a decline for Iran. Global corn ending stocks, at 315.0 million tons, have increased by 2.6 million.

The USDA expects the average cost of growing an acre of corn to decline in 2024, mainly due to lower fertilizer expenses. The cost for growers to raise an acre of corn in 2024 is estimated to be $856.43, down from $888.23 per acre in 2023 and $926.82 in 2022. This decrease is attributed to lower operating costs of fertilizer, chemicals, and seed, offsetting smaller gains in the cost of fuel, operating interest, and a higher overhead. The estimated cost of fertilizer for corn dropped from $225.78 per acre in 2022 to $189.55 in 2023, with a further expected reduction to $156.92 per acre in 2024.

While farmers received some relief on their fertilizer costs, overall expenses remain high. For 2023, the average amount a farmer needs to break even on corn is $5.08 per bushel, higher than the national average cash price of $4.54 per bushel as of November 14. Non-land costs remain near historical highs, with estimates suggesting it will cost $808 to raise an acre of corn on highly productive soil in central Illinois in 2024, compared to an average of $594 per acre from 2014-2019.

The global food commodity market is expected to retreat from record highs in 2024, following three years of turbulence caused by war, weather, and escalating energy and input costs. Rabobank's annual Agri Commodity Markets Outlook report predicts lower agricultural commodity prices, potentially easing food price inflation. Despite the relief on prices and availability, Rabobank anticipates weak economic growth in 2024, limiting the growth in agricultural commodity demand.

Data for Technical Analysis (5H) CFD US Corn Futures - Dec 23 (ZCZ3)

Resistance : 471.76, 472.06, 472.53

Support : 470.82, 470.52, 470.05                              

5H Outlook

Source: Investing.com                              

Buy/Long 1 If the support at the price range 468.82 - 470.82 is touched, but the support at 470.82 cannot be broken, the TP may be set around 471.76 and the SL around 467.82, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 471.76 - 473.76, TP may be set around 475.00 and SL around 470.00, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 471.76 - 473.76 is touched, but the resistance at 471.76 cannot be broken, the TP may be set around 470.46 and the SL around 474.76, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 468.82 - 470.82, TP may be set around 463.00 and SL around 473.00, or up to the risk appetite.       

Pivot Points Nov 16, 2023 02:25AM GMT