Strong cash market, user margins support corn prices

By Jason Sagebiel, Intl FCStone | November 25, 2014

The corn market has found support from positive end-user margins and a strong cash market. Ethanol remains very choppy in the spot market, with margins moving accordingly. The nearby spot ethanol market is allowing ethanol processors to be more aggressive in buying corn that, so far, has been slow to enter the marketplace. This year’s harvest has been dawdling, thus giving producers plenty of time to place corn in strategic places. This year, with a record yield, the producer has been granted an opportunity to utilize his storage to its fullest potential.

USDA’s November supply and demand estimates surprised the trade with a 0.8 per bushel lower yield estimate to place production at 14.407 billion bushels. With old crop carryout of 1.236 billion bushels, total supply is estimated at 15.668 billion bushels, up from 14.782 a year ago. Demand was calculated at 13.660 billion bushels. The ethanol sector increased usage from the previous projection by 25 million bushels at 5.150 billion bushels. Exports remained steady at 1.75 billion bushels, a decrease from last year. Larger global stocks and stronger U.S. dollar will pare demand. The feed sector is expected to use 5.375 billion bushels versus 5.13 billion bushels a year ago. The end result is a carryout sitting just above 2.0 billion bushels. World corn carryout jumped from 137.78 million metric tons a year ago to 172.99 million metric tons, thus limiting U.S. exports. 

The trade will look to the January USDA report for the final U.S. yield. In 2009, the previous record year, yield estimates from November to final increased by 1.8 bushels. That was the biggest increase since 1992 when the yield increased by 2.2 bushels per acre. Traders will look at the January report from two perspectives: any changes to yield and acreage.

December Corn Futures




Date

High

Low

Close

November 24, 2014

3.72 3/4

3.65 1/2

3.67 1/2

October 24, 2014

3.65

3.52 1/4

3.53

November 25, 2013

4.26 1/2

4.22 1/4

4.24 3/4