May corn futures found support around $6 and (as expected) made a small-scale rally on China’s expansion of corn export from the USA.
Therefore, China is going to replenish its corn reserves at the expense of the USA because in China a bushel of corn is $4 more expensive than in the USA. As of April 19th, the export was estimated at 4.3 million tons. The export delivery is not over yet.
The domestic US prices on corn keep growing amid the low reserves left from the previous harvest. The reserves have been around the 8-year low since early March. The ratio between the reserves and consumption has declined down to 6.3% against 14.1% around the globe.
Therefore, the Commodity Trading Department of expects corn prices to rally above $6 in the coming weeks.
The new harvest depends on the weather conditions within the next 2-3 months.
As of April 29th, the US sowing campaign is 53% complete. The weather conditions seem to be favorable.
According to the USDA, corn acres may be expanded by 4.3% this year. If this is the case, this will be the highest figures since 1937.
However, corn prices may feel pressure amid lower external demand for US beef, which will eventually lower the demand for fodder corn.
Nevertheless, there are several factors that may support corn prices, including China’s growing demand and droughts in South America. The corn production forecast for Argentina is cut down to 19.8 million tons as compared to the USDA’s 21.5M. The harvesting campaign is 41% complete.
The US corn reserves are expected to hit record lows till the end of the season, which will only increase the dependence on weather conditions.
