Outside Corn Market Show Tilt US Dollar and Energy Market

Outside corn market forces show a positive tilt with a weak US dollar and strength in energy markets. July corn was up 1 1/2 cents late in the overnight session but traded both sides of unchanged overnight.

Corn futures gained Thursday after the U.S. government cut its supply estimates for the grain. Corn for July delivery rose 21 cents, or 2.7%, to $7.85 a bushel on the Chicago Board of Trade. The U.S. Department of Agriculture cut its estimates on supplies, its expectations on acres dedicated to corn, and corn production estimates.

The USDA supply/demand report should help dictate the short-term direction of the market. Traders see tightening ending stocks ahead for both old and new crops, and a shift to wetter weather into the weekend for the eastern Corn Belt could end the planting season for Ohio and Indiana.

Traders are bracing for Missouri River flooding, with many seeing losses of 300,000 to 500,000 acres of already planted corn. Feedgrain supply is tight, and this has added to the positive tone. July corn closed sharply higher on the session yesterday and just a few cents off of limit-up.

December corn closed moderately higher on the session and came within 3 cents of last week's contract highs before pulling back late. Talk of lower planted acreage because of losses in the eastern Corn Belt from too much rain and talk of losses in harvested acreage due to river flooding along the Missouri River helped spark aggressive buying in corn. Traders were counting on early harvested corn from the south to meet demand in late August and September, but the harsh weather this past week coupled with the delays has some cash traders seeing value in July corn receipts. Talk of tight old crop supply helped to support the rally as well yesterday.

Weather looks to improve for Midwest corn that has already been planted, but a dry and hot trend looks to persist in the south. Ethanol production for the week ending June 3rd averaged 915,000 barrels per day. This was up 0.66% from the previous week and up 9.06% from last year. Total ethanol production for the week was 6.405 million barrels, the highest weekly total since January 21st.

Corn used in last week's production was estimated at 96.07 million bushels. Corn use needs to average 103.3 million bushels per week to meet this crop year's USDA estimate of 5 billion bushels. Stocks as of June 3rd were 19.644 million barrels. This was down 2.88% vs. last week and this pushes up implied weekly demand to near highs for the year. While the USDA rarely makes changes for the June report for yield or acreage, there have been 4 years since 1995/96 that there have been changes (all lower), and 3 of those years also saw planting revisions.