Global Corn Market Faces Bearish Outlook Amidst Increased Ending Stocks and Stable Demand

Corn prices were mostly higher due to ongoing weather challenges, with heavy rain expected in the northern US and hot, dry conditions in the rest of the Corn Belt. The USDA rated 71% of the corn crop as good to excellent, slightly down from last week.

The outlook for U.S. corn in the 2024/25 season remains unchanged, with the average price still at $4.40 per bushel. Global coarse grain production is projected to be 1.4 million tons lower, at 1.511 billion tons. Foreign corn production shows a slight increase, with higher outputs in Ukraine and Zambia offsetting a reduction in Russia. Ukraine's corn area has increased, while Russia's has decreased.

Corn exports are expected to rise for Ukraine and Tanzania but fall for Russia. Imports are up for Malawi, Zambia, and Mozambique. For 2023/24, corn exports have increased for South Africa, Russia, the EU, and Uruguay. Global corn ending stocks are down 1.5 million tons from the previous month, now at 310.8 million tons, mainly due to reductions in South Africa, Russia, and Tanzania.

The USDA's June 28 report will update on-farm corn stocks, which were just over 5 billion bushels as of March 1, the second-highest on record for that date. Buyers are offering small premiums to coax grain from farmers, but most are holding out for better prices. U.S. corn farmers now must decide between selling now or risking lower prices when new grain floods the market in October and November. Demand for corn remains solid, particularly for ethanol and feed. The USDA predicts US corn inventories will hit a six-year high by September 2025. The uncertainty of when farmers will sell could lead to volatile grain prices. Meanwhile, commercial buyers are betting on lower prices due to the grain surplus.

According to European Commission data, from the start of the 2023/24 marketing year until June 11, EU countries exported 42.6 million tons of grain, a 4% decrease compared to the same period last year. Imports fell by 19% to 31.5 million tons, primarily due to a significant reduction in corn imports.

During this period, EU corn exports increased by 12% to 3.62 million tons. However, corn imports dropped by 31% to 17.5 million tons. The USDA's more optimistic estimate for corn imports is 21 million tons, down from 23.2 million tons in the previous season.

Ukraine remains a key supplier, accounting for 68% of the EU's corn imports (12 million tons). Russia also contributed 312.1 thousand tons of corn. The rise in wheat consumption for feed during the 2023/24 season led to reduced corn imports. However, in the new season, higher wheat prices are expected to boost corn consumption for feed, alongside a forecasted increase in EU corn production.

In a significant development, Argentina will start exporting corn to China in July 2024, following confirmation from Chinese authorities. This move positions Argentina, the world’s third-largest corn supplier, to expand its global reach and tap into China’s market, which imports about 20 million tons of corn annually. This agreement, initially struck last year but delayed by regulatory issues, now opens new economic opportunities for Argentina, especially as it begins harvesting its 2023/24 corn crop, estimated at 47.5 million tons. This development not only boosts Argentina’s agricultural sector but also strengthens bilateral trade relations with China.

The USDA expects Zimbabwe's demand for feed corn to increase to 350,000 metric tons in 2024-2025 due to limited grazing until the next rainy season. However, corn production is forecasted to drop by 60% due to extreme drought caused by the El Niño weather phenomenon, leading President Emmerson Dambudzo to declare a "state of disaster." The 2024-2025 corn output is projected at 635,000 tonnes, down from 1.5 million in 2023-2024. Domestic consumption is forecasted at 1.9 million tonnes, necessitating imports of over 1 million tonnes to meet demand. With regional droughts affecting other corn-producing countries, Zimbabwe plans to source corn globally, particularly from Brazil, Argentina, Russia, and the US. The Zimbabwean Grain Marketing Board’s reserves are expected to fall to 150,000 tonnes, well below the required 500,000 tonnes. Corn is Zimbabwe’s main staple, predominantly produced by smallholder farmers reliant on rainfall.

In Azerbaijan, corn imports increased by 23% in volume and 17.2% in value in the first five months of 2024, totaling 57,600 tons worth $18.2 million.

Corn futures at the Chicago Board of Trade (CBOT) are currently trading within stable ranges, influenced by Midwestern weather forecasts for direction. Analysts in Chicago described the commodities as experiencing rangebound patterns.

Regarding corn, analysts emphasized the need for significant weather changes to push prices above $4.70 per bushel in the July contract and set support around $4.35 per bushel, with the December contract projected between $4.50 and $4.80 per bushel, potentially testing higher ranges if hot weather persists without accompanying rains.

Despite decreased production in major countries like the US, Brazil, and Argentina, global corn utilization is anticipated to rise modestly. Market trends indicate a bearish outlook for 2024 due to reduced global exports and higher ending stocks, reaching their highest levels since 2018-19. This suggests a challenging market environment ahead for corn prices.

Data for Technical Analysis (1H) CFD US Corn Futures - Jul 24 (ZCN4)

Resistance : 447.58, 447.76, 448.04

Support : 447.02, 446.84, 446.56                                   

1H Outlook

Source: TradingView                       

Buy/Long 1 If the support at the price range 446.50 - 447.02 is touched, but the support at 447.02 cannot be broken, the TP may be set around 447.72 and the SL around 446.25, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 447.58 - 448.08, TP may be set around 450.00 and SL around 446.75, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 447.58 - 448.08 is touched, but the resistance at 447.58 cannot be broken, the TP may be set around 446.98 and the SL around 448.33, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 446.50 - 447.02, TP may be set around 444.50 and SL around 447.83, or up to the risk appetite.       

Pivot Points Jun 20, 2024 03:28AM GMT

Sources: Latinamericanpost, Investing