Corn futures prices saw an impressive rally last week due to a combination of positive fundamentals news, friendly technical chart signals and short covering by funds.

What’s happened

Heading into the May USDA WASDE report, the recent corn price rally may take a pause, as traders square up positions into the report.

Traders will scrutinize Friday’s report. This report will show both production and demand information for the 2023-24 crop year, along with the industry’s first official view of the 2024-25 crop year.

While I am eager to see if demand for U.S. old crop corn will be increased, my larger interest lies within South American corn production. With recent adverse weather in Brazil and insect infestation in Argentina, the USDA may finally be ready to acknowledge the situation by adjusting production data on Friday’s report to the downside.

From a marketing perspective

Production questions are surfacing regarding Brazil’s second-crop corn production, known as the safrinha crop. Recent hot and dry conditions may have affected potential yield.

The safrinha crop accounts for 75% of Brazil’s total corn production. Keep in mind, the safrinha corn is the crop that many nations of the world rely on for import during the month of August, when the U.S. crop is not yet ready to be harvested. So, if there is a production issue, it will be noticed around the world.

In the April WASDE report, the USDA pegged total Brazil corn production at 124 mmt. This is very different than what Brazil’s Conab feels the crop size is at, which is 111 mmt. What will Friday’s report show?

In Argentina, the corn crop has suffered due to an outbreak of leafhopper insects spreading spiroplasma disease. This was highly unexpected on multiple fronts and has also been a contributing factor to the recent corn market rally.

On the April WASDE report, the USDA pegged Argentina corn production at 55 mmt. This is substantially higher than the recent 46.5 mmt estimate from the Buenos Aires Grain Exchange. We will see if the USDA acknowledges the situation in the May WASDE report.

Prepare yourself

Currently the USDA has global corn carryout for the 2023-24 crop year at 318.28 mmt, which is a comfortable amount. Global demand for corn remains strong.

However, if perception shifts that global production is instead getting smaller, that perception could further spur the recent corn rally.

The industry remains mindful of the large, massive, short position still held by funds. As of the most recent Commitment of Traders report, the managed money funds were still short 218,000 contracts. Any hint of lower global production of corn could spur the next leg higher of a corn rally.

Keep in mind, any rally the market may see in the coming weeks due to global weather concerns, will be an opportunity to market both old and new crop corn cash sales.

Reach Naomi Blohm at 800-334-9779, on X (previously Twitter): @naomiblohm, and at [email protected].

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