The February WASDE report didn’t provide any surprises, but ongoing The impact of the drought in Argentina and the southern regions of the United States has pushed corn May prices above $3.80 per bushel.
The contract is at its highest point since September 2017, but still a far cry from the $4.30 level that we saw last July.
The May contract added 3.52% in February.
I had noted during the final months of November and December that corn was looking for any reason to breakout above that $3.50 range for front-month contracts.
The markets know that the world is awash in corn. They know that the U.S. production number will be large and that yields will come in at record highs. And they knew that future demand factors like Chinese and Brazilian ethanol production is still several years from importance.
But Argentina’s ongoing drought crisis has pushed production expectations down in the region and fueled speculators to consider the impact of the ongoing U.S. drought on the upcoming crop. Last week, management money shifted from bearish to bullish in the corn sector.
Other Factors Driving Corn Prices
The drought was not the only factor driving speculators. In February, we focused on global corn production expectations, as well as the impact of ethanol investments and standards that could reshape the demand for corn.
Specifically, we’ve looked at:
• The impact of higher corn prices in Ukraine, and what 2018 Ukraine corn production looks like;.
• How investors in Brazil, and Chinese interest in US corn, will influence corn production;
• if US corn demand is real or not; and,
• The rising corn acreage expectations worldwide.
Moving forward, we expect more room for corn prices to run due to speculation, the USDA’s historical pace of revisions to Argentina’s crop, and the potential that we see an increased shift to soybean acreage here in the United States.
Moving into the month of March, US acreage and Argentine production concerns will continue to impact both corn prices. Be sure to sign up for for free 3-week trial at GrainCents as this month could be the most impactful for how and when you price your corn for the rest of 2017/18 old crop supply, as well as a significant portion of your 2018/19 supply.