US corn prices seen weak amid limited demand recovery, easing weather concerns

Source: By S&P Global • Posted: Tuesday, July 28, 2020

New Delhi — Corn prices in the US are likely to be subdued in the upcoming three-four months as importers and ethanol manufacturers see limited demand while easing weather concerns point toward a big corn crop, analysts said.

 US corn prices gained substantially in the beginning of July on the back of acreage and production estimate reductions, but that uptick in prices was short-lived as demand concerns for US corn started surfacing soon after.

“Demand is always the driver for prices in my opinion and that’s why the market is back down to these levels despite the 5 million acres cut in expected acreage less than a month ago,” said Pete Meyer, head of Grains and Oilseed Analytics at S&P Global Platts Analytics.

The US Department of Agriculture on June 30 cut acreage estimates for US corn in the 2020-21 marketing year (September-August) by a surprising 5 million acres to 92 million acres.

The prices of corn rose on the Chicago Board of Trade following the acreage cut and the front-month September contract touched a three-month high of $3.50/bushel on July 1.

CBOT corn prices now have slipped back to previous levels. The September futures contract settled at $3.25/bu on July 27, almost testing the levels seen before June 30.


After the unprecedented stall in production due to collapsing prices of crude oil and demand-destruction due to COVID-19 restrictions, ethanol output in the US picked up in the last few months. However, the fuel output recently witnessed its first setback following the recovery.

US ethanol production in the week ended July 17 dropped to 908,000 b/d from 931,000 b/d in the previous week, according to data from the US Energy Information Administration.

“We saw ethanol production slow for the first time since the initial pandemic drop, despite lower stocks. That is not a good sign,” Meyer said.

The inability to break away from the recent roughly 900,000 b/d in production suggests more cuts to ethanol demand for corn are forthcoming as gasoline demand appears to have peaked, he added.

Gasoline consumption in the US has pulled back after states with large motor driving population have put COVID-19 restrictions back in place in the last two weeks, said Arlan Suderman, chief commodities economist with StoneX Group.

The USDA has lowered estimates for corn used for ethanol for the 2019-20 marketing year by 200 million bushels since March to the current estimate of 4.85 billion bushels.

Corn prices in the US take support from ethanol demand as nearly 40% of corn produced in the US goes into ethanol production.


The market has shown increased confidence that US will produce a big corn crop, and the focus is increasingly shifting to demand, with eyes on China, Suderman said.

Suderman said he expects 2019-20 corn exports to exceed USDA’s target by 15 million bushels to 1.79 billion bushels due to the recent upturn in Chinese demand for both old and new-crop corn.

China has recently made some big purchases of US corn and soybean but it will be interesting to see if this buying trend from China continues in the long run.

StoneX Group’s corn exports estimate for the 2020-21 marketing year is 2.23 billion bushels, up 80 million bushels from USDA’s estimate, again based on recent sales to China and tightening global stocks.

Meanwhile, Platts Analytics expects that though 2020-21 US corn exports can rebound to 2 billion bushels, and possibly to 2018-19 levels of 2.07 billion bushels, it will remain under USDA’s estimates of 2.15 billion bushels.

“Competition from Brazil and Ukraine will still keep US export chances in check from expanding much further,” Meyer said.

If the new crop outperforms current expectations, and prices fall below $3/bu for an extended period of time, there may be some additional demand, but not the 2.15 billion bushels that USDA expects, he added.

Meyer said the exports figure of 1.775 billion bushels for the 2019-20 marketing year look “about right”.


Dry and hot weather conditions gave an upward nudge to corn prices earlier in July. However, despite remaining consistently higher than normal, temperatures did not reach extreme levels, thus limiting heat stress, weather experts said.

Weather forecast seems favorable for US corn for the rest of the months as well, according to experts.

“The forecast for the balance of July shows slightly above normal temperatures, but no extreme heat,” said Kyle Tapley, senior agricultural meteorologist with weather agency Maxar.

The USDA in its latest crop progress report released July 27 said that corn crop conditions ratings improved by 3 percentage points on the week to 72%.

US corn production in 2020-21 is expected to be at 15 billion bushels (381.02 million mt), compared to 13.617 billion bushels (345.89 million mt) in 2019-20, according to the USDA.