Corn Market Faces Pressure as Rally Stalls – Global Supply Concerns Persist
The recent rally in corn prices came to a halt last week as profit-taking and global market pressures pushed prices lower. On Friday, the March 2025 contract at the CBoT dropped by 8.25 cents to settle at 482.00 ct/bu (182.58 EUR/t). The Euronext March 2025 contract also saw a decline, albeit more moderate, losing 1.50 EUR to close at 215.50 EUR/t.
Market Overview:
- CBoT Open Interest Surges: For the first time, open interest in CBoT corn exceeded 2 million lots, indicating increased speculative activity.
- Tight Global Corn Supplies:
- Global corn reserves are expected to hit a 10-year low in 2024/25.
- Brazil’s stock-to-use ratio is forecasted at 2.1%, the lowest in 42 years, down from 7.1% last season.
- The U.S. ratio remains relatively high at 10.2%, providing some buffer.
- Brazilian Exports Drop:
- Since July, Brazil’s corn exports have fallen by 29% compared to last year.
- Shipments to China have dropped by over 90%, whereas in 2023, China accounted for 29% of Brazilian exports.
- A weaker Brazilian crop could shift global demand toward U.S. exports.
Ethanol Demand Fuels Domestic Consumption
- Brazil’s corn ethanol production has surged by 30%, while sugarcane-based ethanol output dropped by 1.8%.
- Corn ethanol now makes up 19.5% of total ethanol production and is expected to reach 23–24% by March.
- Growth is particularly strong in Central-West Brazil, where sugarcane is less profitable.
- Corn ethanol benefits from a year-round production cycle and valuable by-products like DDGs for animal feed.
Argentina: Crop Quality Deteriorates
- Analysts downgraded Argentina’s expected corn production.
- Crop quality declines:
- The “Excellent” category fell to 28% (down 2%).
- The “Poor” category increased to 22%.
- Dry conditions and heatwaves continue to limit yield potential.
Speculators Remain Bullish on Corn
- Hedge funds and speculators are heavily long on corn, expecting further price gains.
- Net-long positions increased by 39,000 lots to a total of 351,000 lots.
- Pure long contracts reached a record high of 447,000 contracts.
U.S. Corn Exports Exceed Expectations
- Total U.S. corn exports: 43.29 million metric tons so far this season.
- USDA projections are already 70% fulfilled, outpacing the 66% historical average.
Market Outlook
- Corn supply remains tight, supporting long-term bullish fundamentals.
- Argentina’s deteriorating crop conditions could further impact global availability.
- Brazil’s planting delays continue to be a critical market factor.
- High U.S. ethanol demand and potential export growth add further support.
Despite last week’s losses, fundamentals remain strong for corn, keeping market participants focused on South American crop conditions and global demand trends. Expect continued volatility as traders assess production risks and export flows. 🌽📈
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