CBOT corn futures jumps 4% as ethanol, export confidence grows

Chicago corn futures gained up to 4% Thursday as a combination of buying from ethanol producers and after the USDA revealed strong net sales figures, driving investors to buy prompt contracts, trade sources said.

The front month May contract added almost 22 cents at one point, climbing to $5.83/bu at one point, up 4% on the overnight settle, before easing slightly as the end of day approached, after the USDA put US corn net sales for the 2020/21 marketing year at 66.4 million mt.

The agency has forecast exports of 66 million mt for the full marketing year, but news that net sales have already surpassed that figure with a third of the marketing year still to go teed up expectations of a major revision of figures when the monthly Wasde report is released on Friday.

“Fundamentally we can say that exports are now to a point where the USDA should very seriously consider increasing their target as sales keep up and shipments are going out,” Ted Seifried of Zaner Ag Hedge told Agricensus.

At 66 million mt, the US was already on course for a record-breaking year but the pace of buying from China in particular has left analysts to already revise their expectations for 2020/21 corn exports higher, with some calling for as much as 72 million mt.

On top of that, growing confidence in the country’s ethanol sector, after a prolonged period of struggle under the administration of President Trump, is also fuelling the upward momentum.

“The margin picture is definitely better than anybody could have predicted even six weeks ago, so we’ve clearly pushed a few more guys into the mindset of ‘I need to get some June/July corn bought,” Kelly Herrick of Advance Trading noted.

With around 40% of a typical US corn harvest used to produce ethanol, the apparent rosy outlook for the upcoming peak driving season has raised expectations of a further recovery in production after lockdowns severely dented driving demand.

Finally, fears over Brazil’s weather damaging the outlook for the country’s vital second corn crop mingled with rumours that Chinese trade sources had made enquiries over buying additional volumes of corn to provide a potently supportive cocktail.

“I have also heard the bit about ethanol producers getting more aggressive on bids because they feel more confident in the summer driving season,” Seifried said, while the China rumours – a regular part of the industry currently – have proved difficult to confirm.