- The US is not running out of corn supplies. I don't know how to say that more clearly than I have.
- Still, the recent firming of national average basis and weakening carry in the July-September futures spread indicates 2023-2024 Q4 demand is picking up.
- Technically, the new-crop Dec24 futures contract opened the door to a possible extension of its long-term downtrend at the end of May.
Roughly 20 years ago, when I moved to Omaha from central Kansas, or in other words from the Wheat State to the Corn Belt, I learned that when in doubt about what to discuss, write about corn. Why? Because that’s all folks in the US really want to talk about, or read about, day in and day out. I also learned early that if I wanted to clear out a room early, while giving a presentation, start talking about wheat. Truth be told, I used that trick more than once over the years on the third day of presentations at trade shows, knowing we were heading out as soon as my talk was done.
Let’s talk about corn, though. I continue to see chatter about how tight old-crop US supplies are, and I have to shake my head. I’d say quietly, but folks who know me know I seldom disagree quietly. Some of you might recall I’ve built my own look at available stocks-to-use (as/u) based on the market’s National Price Index (national average cash price)[i]. At the end of May the National Corn Index (ICY00) was calculated near $4.26, equating to a month-end as/u of 12.4%. Looking at the scatter chart I’ve built going back through the 2004-2005 marketing year, we see that puts the 2023-2024 marketing year near mid-range. Additionally, this year’s as/u has grown from the end of August 2023 figures of $4.82 (NCI) and 11.4%. Are US old-crop corn supplies getting tight? No.
Something else to keep in mind is what happened a decade ago. The end of May 2014 saw the NCI priced near $4.43 before falling to a low monthly close of $2.84 at the end of September. This time around the NCI finished May near $4.26, solidly below where it was 10 years ago. And while I don’t believe in analogous years due to Chaos Theory, I find the fact the correlation between 2010-2014 and 2020-2024 is running along at about an 80% clip. What could change the trajectory of the NCI? Old-crop corn has recently seen renewed commercial support indicated by national average basis and the weakening carry of the July-September futures spread.
What about the new-crop market? Starting from a technical point of view, the December 2024 futures contract (ZCZ24) remains in a long-term downtrend on the continuous (Dec only) monthly chart. May turned out to be a pivotal month as Dec24 came up just short of taking out its previous 4-month high of $5.0225 (January 2024), hitting a mark of $4.9675 before closing at $4.67, down 2.5 cents for the month. Technically, this would be viewed as a bearish spike month, bringing the previous lows of $4.46 (February 2024) and $4.47 (November 2023) back into the discussion. A decade ago, Dec14 collapsed during May, closing at $4.5750, down 51.75 cents for the month. As the summer and fall seasons unfolded, Dec14 fell to a low of $3.1825.
A good friend sent me a message over the weekend, “Am I being too bearish by thinking it’s over for the corn market? I’m wondering if we get any sort of pop back to $4.80-$4.90 should be sold…” In a couple sentences, my friend summed up the recent change in attitude toward the corn markets (both old-crop and new-crop). Rather than buying dips, the idea now is to sell rallies. This change can be seen on the noncommercial side as well. The latest CFTC Commitments of Traders report (legacy, futures only) showed noncommercial traders increased their net-short futures position by 68,300 contracts as of Tuesday, June 4, including a 69,540-contract increase in short futures. This put the net-short position at 119,920 contracts. Three weeks ago the same group (noncommercial traders) held a net-long futures position of 224 contracts, then the change in attitude of “Sell the rallies” kicked in, changing the latitude (price level) of both old-crop and new-crop markets.
Nearing the end of this piece, with the lyric from the Pink Floyd song Time playing in my head, “The time is gone/The song is over/Thought I’d something more to say…”, I could either talk about wheat to bring this piece to a close or bring up the Kardashians of the grain report world, NASS’ nonsensical and completely irrelevant weekly crop condition numbers. A decade ago, back in 2014, the index I created using all NASS’ made-up ratings[ii], the first weekly corn condition index number came in at 198 points. Last week, after NASS released its first condition silliness for the 2024 corn crop, the index number was 195. Did we really need another comparison to 2014? Not really. But I know how many folks in the industry take these numbers seriously, until the numbers aren’t bullish that is.
[i] As compared to the nonsensical practice of using USDA’s imaginary supply and demand numbers to estimate ending stocks-to-use.
[ii] Rather than just using good-to-excellent, which makes absolutely no sense.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
