World Grain - January 2018 - 18

GRAINMARKET REVIEW
Monthly corn prices

Coarse grains
Bearish fundamentals keep corn
downtrend in place

(U.S. dollars per tonne)

200

150

100

by Chris Lyddon
0
Nov 2017

Oct 2017

Sep 2017

Aug 2017

Jul 2017

Jun 2017

May 2017

Corn fundamentals are bearish and prices neutral after a December
USDA report showed no major changes. Corn is still in a long-term
downtrend despite an increase in likely U.S. ethanol use as China's
sorghum imports drive a switch in raw material.
In its Market Perspectives report, published Dec. 14, the U.S.
Grains Council (USCG) described corn prices as "on the defensive
after a neutral December WASDE report," referring to the World Agricultural Supply and Demand Estimates report. The WASDE report
showed no major changes to the U.S. corn balance sheet and "except
for dry weather in Argentina, all other fundamentals remain bearish."
"Some technical indicators and recent fund activity may give way
to a mild rally, but the long-term trend for corn is still down," the
USGC said.
The USGC also cited a Reuters report that Argentina's corn plantings were on their slowest pace ever, based on data going back to
1995, with 62% of the country's crop having been sown so far, compared with 70% at the same point the previous year and a 5-year
average of 75%.
"The slow planting is the result of La Niña-induced dry weather,
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the weather and consequent planting delays have not worried the
global markets, but a continuation of this trend could spark a shortcovering rally."
Global competition for corn buyers is one reason U.S. corn exports
remain below last year's volumes, the USGC said. Year-to-date exports are 18% of the USDA's forecast, compared with an average of
25% at this point in the year.
"The slow export pace is a key factor keeping corn prices in their
current bearish state," the USGC said.
One feature of the coarse grains market commented on by the
86*&LVWKDWWKH86'$KDVUDLVHGLWV¿JXUHIRU86VRUJKXPH[ports to China by 50 million bushels (1.27 million tonnes) on the basis of faster-than-expected shipments to that country and at the same
time added 1.27 million tonnes to the expected U.S. consumption of
corn for ethanol production.
The International Grains Council (IGC) reported that corn export
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rose by 2% month on month.
"Values in South America rose on slow farmer selling and ocFDVLRQDOO\GLI¿FXOWZHDWKHUZKLOHYDOXHVLQWKH86WLFNHGKLJKHU
drawing light support from stronger cash markets," the IGC said.
"U.S. futures dropped to fresh contracts lows in mid-November,
pressured by bearish fundamentals and news of a larger-than-expectHGXSJUDGHWRWKHRI¿FLDO\LHOGHVWLPDWH:LWKQRQFRPPHUFLDOIXQGV
holding a record large net short position, the market bounced later in

Source: U.S. Department of Agriculture; World Bank.

the month, as a pickup in exports sparked speculative buying."
Gulf fob quotations were slightly up on the month at around $158,
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farmer selling and strong demand for low-moisture supplies."
Trade in Argentina's old crop is winding down and the IGC quoted
Up River prices in Argentina up by $4 on the month at $154 fob.
"Gains were essentially tied to slow country movement, but with
dryness concerns also slightly supportive," the IGC said. "New crop
offers were competitive, at around $156 fob (March). Domestic values
in Brazil were underpinned by planting delays in central regions and
talk of a potentially smaller safrinha outturn. Strong export demand
added to the upside, lifting Paranagua fob prices by $5, to $161."
The IGC put nominal Black Sea prices steady at around $163 fob.
"While light support stemmed from this year's smaller harvests in
Ukraine and Russia, gains were kept in check by sluggish overseas
buying interest," the agency said.
The IGC reported that its GOI barley sub-Index had "declined
fractionally" on the month "in mostly quiet activity."
"Saudi Arabia's recently announced plans to substitute some barley purchases with alternatives continued to weigh on market sentiment," the IGC said. "However, overall losses were contained by
signs of better demand, including a fresh tender by Saudi Arabia for
720,000 tonnes as well as buying interest from other destinations."
Malting barley values were supported by reports of disappointing
harvest quality in Australia, the IGC said.
"The sustained stronger pace of exports helped to underpin prices
in the E.U., with cumulative shipments moving ahead of last season by mid-month," the IGC said. "Nevertheless, strong competition
from other origins continued to temper exporter sentiment."
The IGC quoted French feed barley export quotations down by
$3 on the month at $183 fob (Rouen) and Black Sea prices up $4 at
$192 fob, "underpinned by solid exports. Accumulated shipments by
Russia are so far nearly double last season."
Chris Lyddon is World Grain's European correspondent.
He may be contacted at: chris.lyddon@ntlworld.com.
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January 2018 / World Grain / www.World-Grain.com

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World Grain - January 2018

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