Grain Outlook Ethanol supporting weak corn market

Editor’s Note: Joe Lardy, CHS Hedging research analyst, is sitting in this week for Phyllis Nystrom, the regular “Grain Outlook” columnist.

The following marketing analysis is for the week ending May 19.

CORN — It was another rough week for the corn market. July futures closed at $5.54.5 which was down 31.75 cents this week. December futures closed at $4.99.75 which was down 9 cents for the week. Spreads continue to be very volatile.

Corn planting continues to roll along. Every week so far, planting has been equal to, or ahead of, the five-year average. Planting should be around the 80 percent mark come next Monday.

After last week’s World Agriculture Supply and Demand Estimates report, the market had all weekend to digest the numbers and figure out where to go. The supply side of the corn market is clearly looking better; so the demand side will need to pull the market out of the rut. Inspections were still over a million tons, but that total is still behind both last year’s pace and the five-year average.

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SOYBEANS — The futures market was unkind to soybeans this week. July soybean futures closed at $13.07.25 which was down 82.75 cents for the week. November futures closed at $11.75.5 which was down 48.25 cents. Bean spreads are also quite volatile.

Soybean planting is flying along. All year the pace has been well ahead of the five-year average and at record levels at times. The planting pace next Monday should be in the mid-60s.

Export inspections for soybeans were terrible and set a marketing year low at only 7 million bushels. This is seasonally the slow portion of the marketing year, but inspections should be double what they were this week.

Export sales were a mixed bag. Old crop sales were only 600,000 bushels. Ugh. But new crop sales actually posted a decent tally of just over 24 million bushels.

Export sales didn’t help either with huge cancellations bringing the total down to a marketing year low.

Ethanol margins are very robust. Hopefully this will perk up a little bit of additional demand.

The grain corridor deal with Russia was extended for another two months. The agreement added to the bearishness overhanging the market.

Outlook: The corn will need to find some demand. The Chinese had the biggest cancellations, but other countries also had cancellations this week and that has really pushed the market lower. The weather outlook looks very tame and should keep fresh risk premium on the sidelines for now.

On the latest Commodity Futures Trading Commission report funds continue their selling onslaught. Funds have been sellers over the last four weeks cutting 108,000 contracts over that stretch.

Outlook: Unfortunately, most of the news will keep weighing on the market. Old crop Brazilian soy production estimates keep edging higher. South American bean prices are still well below U.S. values.

Weather is good and the beans are going in the ground quickly.

The new crop U.S. balance sheet is looking much more comfortable with a 335 million bushel carryout. v