Corn Commentary - Dry SA Weather for the Second Week Out; More Buying.
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The market has the weather forecast short-term to see more buying, and it may need to see bearish news from the USDA supply/demand report today to hold them back. The official Brazilian forecast for their corn production was increased to 117.181 million tonnes, well short of trade expectations for 118.72 million but up from 116.71 million in their previous estimate.
The market seems to have the demand fundamentals for it to be sensitive to the weather. For the 30-day period ending December 6, large areas of southern Brazil and central Argentina had 25-80% of their normal precipitation. There are also some areas in southern Brazil showing 5-25% of normal precipitation. The amount of rain in the forecast for the next week has increased from yesterday's model, but there is no for the northern and eastern quadrant of Argentina and southern Brazil for the second week out. This could dry out soils and cause crops to deteriorate.
Exporters announced the sale of 1.844 million tonnes of US corn to Mexico, which was a record single-day purchase for that nation. On top of the strong export news, ethanol production for the week ending December 3 averaged 1.09 million barrels per day. This was up 5.3% from the previous week and up 10.0% from a year ago and was above the range of estimates. Total ethanol production for the week was 7.63 million barrels. Stocks were 20.464 million barrels. Corn used in last week's production is estimated at 110.7 million bushels. Corn use needs to average 99.4 million bushels per week to meet this crop year's USDA estimate. When looking at the current usage pace, one could add 100-250 million bushels to usage. Therefore, it seems that trade expectation for a drop of just 6 million bushels in ending stocks is too conservative.
For the USDA supply/demand report today, traders see ending stocks coming in near 1.487 billion bushels, versus the November estimate of 1.493 billion. Traders expect a slight increase in Brazil’s corn production and a slight decline for Argentina. World ending stocks are expected to come in around 304.47 million tonnes versus 304.42 million in November.
Look for support in March Corn at $5.83 1/2 and $5.79 3/4, with resistance at $5.89 ½. A close above this level would leave $6.09 3/4 as the next target.