Afternoon Corn: Corn enjoys another USDA-inspired rally day
<div class=\"default-font-wrapper\" style=\"line-height: 1;font-size: 12pt; font-family: Verdana, Geneva, sans-serif;\"><div style=\"line-height: 1;\"><span style=\"font-size: 12pt; font-family: Verdana, Geneva, sans-serif;\">Afternoon Corn: <br id=\"isPasted\"> <br>The corn market enjoyed yet another USDA report-inspired rally today. Old crop futures gained 14-15 cents, while new crop only mustered up a 2-4 cent pop. Funds were believed net long roughly 230,000 delta-adjusted corn contracts coming into report day; the CFTC will update their thoughts Monday afternoon. Cash trade was quiet heading into the report, but we assume the futures rally will inspire many users to lower their basis bids amid farm selling.<br> <br>The Jan WASDE lived up to its reputation for curveballs. Corn yields fit that bill; the USDA used a hatchet instead of the expected scalpel, whacking it down to 179.3 bpa (vs. 183.1 bpa in Nov/Dec and 177.3 last year). They raised harvested acres slightly (+0.2 from Nov), which we interpret as them reducing failed acres, and these lower yielding areas in turn weighed more on the yield. Yield was reduced significantly in key Midwest states such as Indiana (198, -11 from Nov), Kansas (129, -9), Minnesota (174, -9), Nebraska (188, -6), Ohio (177, -8), and Wisconsin (174, -7 from Nov). The meaningful cut in production (-276 mil bu from Nov) further tightened the domestic S&D. The USDA projected 24/25 carryout at 1.54 billion bushels, down from 1.738 in December (and that is even with a likely price-inspired 75 million bushel cut to demand – 50 mil bu from feed/residual, -25 mil from exports). Farm price was raised to $4.25 from $4.10? As expected, the world data was an after-thought; outside of the U.S., the only major change was the USDA’s incorporation of China’s latest corn production estimate (+2.9 mmt to 294.9 mmt). The USDA reduced world corn carryout to 293.3 mmt vs. 296.4 in Dec and 317.5 last year. Relative to usage, this is the tightest world corn S&D in a decade. The first quarterly stocks report of 24/25 (a/o Dec 1) completed the bull trio sweep, pegged at 12.07 billion bushels vs. 12.15 expected, and 12.17 last year.<br> <br>The undercard to the WASDE was weekly export sales, which were unimpressive across the board, likely with an eye toward holiday timings (w/e Jan 2<sup>nd</sup>). Corn sales for the week were a marketing year low of 445,000 metric tons; trade was expecting roughly 750k. The main buyer was Colombia; Mexico was near absent? Sold/shipped for the current 24/25 marketing year is still a robust 39.25 million metric tons, which compares to 30.28 year ago. The export headline of the week has been South Korean buyers dipping their toes back in the markets for both corn and feed wheat coverage. Combined, they purchased nearly ten cargos of corn? The U.S. competed; we will find out definitively next week how much traded from that origin.<br> <br>Elsewhere, end-user markets mostly performed well today and for the week. Cattle were the leader (up $1 today, $5 for the week); milk the laggard (down -3% today and -2% for the week). Ethanol finished the week higher, but we think the crush has slipped into negative territory for most Midwest plants (to the tune of 5-10 c/gal losses, net of all costs). The big macro was mixed; the US Dollar finished higher for the week, but Crude Oil impressed with a strong defense of support and subsequent rally higher. The outgoing Biden administration offered some guidance on 45Z credits (mostly disappointing for corn ethanol producers) but left many details up to the incoming Trump camp. South American weather remains little changed; the focus on Argentina remains given hot/dry weather over the next week, but there remains considerable optimism of a wetter shift after next week. <br> <br>In the options, volatility was perhaps just a little weaker coming out of the report (they were not especially bid to begin with?). Just after the report release, 1,800 March $4.30 Puts traded at just under one cent. Calendar spreads were firm, particularly between crop years. Corn gained a lot on the wheat but was mixed versus the soy (new crop beans gained a lot on new crop corn). Looking at the charts, old March Corn resistance at $4.60 likely becomes the first layer of support on a break. We see some modest resistance for CH at $4.75, then again at $4.85. Momentum indicators are positive, but the RSI is starting to get a little overbought again (low 70’s on the daily CH). The weekly corn chart continues to look favorable but is also getting overbought (high 70 RSI).<br> <br>KJ </span></div></div>