Corn Prices Face Tough Outlook as Global Supply Swells Ahead of WASDE Report
Corn Prices Face Tough Outlook as Global Supply Swells Ahead of WASDE Report
An overabundance of supply, lagging consumption and weak export demand have plagued the commodity
- Corn prices are languishing near three-year lows ahead of the WASDE report.
- The fundamental backdrop for /ZC remains tilted to the downside.
- The technical outlook for corn is tilted to the downside.
Corn prices strained amid high global stocks and low demand
Corn prices are trading near the lowest levels in over three years following months of declining prices amid a bearish fundamental backdrop. An overabundance of supply, lagging consumption and weak export demand have plagued the commodity recently, but some traders think the lows might be in. Are corn prices going to reverse the recent downtrend?
Chicago March corn (/ZCH4) traded as low as $4.51 and are moving lower ahead of a key agricultural report due tomorrow. The problem now is there is a lot of corn. Farmers increased their planting acreage last year in response to higher prices brought on by supply chain issues caused by Russia’s war in Ukraine. The U.S. saw planted corn acreage rise to 94.9 million acres in 2023, up over 7% from 2022’s 88.6 million acres, according to the United States Department of Agriculture (USDA).
At the same time, overseas supply has also increased. The latest USDA estimate for corn production in Brazil—a major producer—was 129 million tons vs. an expected 127.2 million tons. Argentina's production was also high at 55 million tons vs. an expected 54.7 million, according to the USDA.
WASDE report on tap after Brazilian crop report fails to bolster prices
That high volume in South America has reduced export demand on the U.S. supply, and U.S. ending stocks remain well above prior years. December ending stocks for corn were at 2,131 million bushels. That compares to ending stocks of 1,377 and 1,361 million bushels for 2021/22 and 2022/23, respectively. The USDA’s world agricultural supply and demand estimates (WASDE) for January will cross the wires Friday, Jan. 12. The new projections for corn and other agricultural commodities could spark volatility.
The global grain market saw Brazil update crop estimates for 2023/2024 yesterday. CONAB, Brazil’s National Supply Company under the Ministry of Agriculture, Livestock and Food Supply, projected corn production at 117,604 thousand tons, a 925 thousand ton drop from the prior month’s estimate. It wasn’t enough to push U.S. corn prices higher, suggesting the WASDE would need to post a bigger cut to its projections to cause higher corn prices.
Technical outlook for corn
Over the past several months corn has traded below its 50-day simple moving average and its 26-day exponential moving average, another closely watched MA. In late December, prices fell below the support level of a falling wedge pattern that was carved out going back to September. That break invalidated the chance for a breakout, pushing prices into nearly oversold levels, according to the relative strength index (RSI). For now, the technical outlook suggests more pain is likely ahead, although a consolidation phase is also likely if fundamental conditions improve.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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