Corn prices continue to remain historically strong despite recent dramatic trading ranges and volatility. The fundamentals remain friendly on a domestic and global scale, which should keep prices firm for now, and keep funds as active buyers on breaks.

Looking at next week’s USDA WASDE report, traders anticipate slightly smaller ending stocks to be shown on the report for corn, along with a potential adjustment lower to the size of the corn crops in South America. The question is, has this news already been traded into prices?

Demand factors to watch

March 2022 corn futures have recently traded right up to overhead technical resistance on daily charts. The high from June 10, 2021 (a USDA report day) was $6.40, with $6.40-1/2 the previous high from May 7, 2021. On the lower end of the range, support is now firmly at the $6 level. Heading into next week’s report, corn may likely stay within this trading range as it remains very fair value for old crop corn.

For prices to break above that $6.40 resistance area, traders will need to see a smaller ending stock number on next week’s report. Current U.S. corn carryout is currently pegged near 1.5 billion bushels. Some in the industry feel it may ultimately be as low as 1.3 billion bushels, but would the USDA dare to show such an aggressive cut to stocks on next week’s report? Likely not.

Looking at demand, on the last USDA report, corn use for ethanol was 5.325 billion bushels, up from 5.25 million bu. the month prior. So, it seems unlikely that USDA would again increase corn use for that category. One place USDA might show a reduction in corn demand could be corn use for feed, as both the U.S. hog herd and cattle herd are down from prior years.

However, corn exports have been solid lately, and trade will be curious to see if USDA increases export demand on next week’s report. If so, that would bring the ending stock number lower.

From a global demand perspective, overall global demand for corn remains strong. It’s possible USDA lowers China’s corn import number a small amount, as evident with the recent cancelation of 380,000 MT of U.S. corn. (This does not mean that China does not need grain for feed. They could just be substituting corn for feed with sorghum or potentially wheat.)

Regardless, corn ending stocks on a global scale are trending lower.

Supply factors to watch

Global corn carryout has been inching lower due to strong demand and lower global supplies. South American corn production is what the traders will be monitoring on next week’s report. Will USDA tweak South American corn production lower? Or leave it unchanged? Looking to South America, the first crop corn being grown in Brazil is likely needed to stay IN South America and will likely not be available to export.

Hence, the focus then shifts to second crop corn in Brazil. Remember the Safrinha crop accounts for 70% of total Brazil production, and this is the crop that is exported in late July or early August.

Lower supplies of corn around the world should keep the prices of old crop corn firm. And note that this strong demand and lower supplies has been increasing the prices of both the December 2022 new crop corn, and December 2023, to ensure acres are bought and planted.

December 2022 corn prices remain in a steady upward channel as the reality of tight ending stocks -- on a global scale -- may not get fixed in one crop year.

The February USDA report will be important to monitor as the fundamentals for the corn market remain friendly for prices. The question mark for where U.S. acres will be this spring remains a big unknown. Demand remains strong overall, and U.S. corn in the world remains competitively priced.

Reach Naomi Blohm: 800-334-9779, Twitter: @naomiblohm, and [email protected].

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