A number of external factors are weighing on corn futures right now. Oil prices, which initially saw gains earlier this week, have dropped again due to weak demand and rising supply, despite concerns over potential disruptions from the Middle East conflict and Hurricane Milton in the U.S. On top of that, the rally in the U.S. dollar is making our corn exports less competitive globally, right in the middle of harvest. China’s slowing economy is another key piece of the puzzle—reduced industrial activity means less demand for commodities.

Ethanol Keeps Corn Demand Relatively Strong

This new crop year is forecast to see 5.450 billion bushels of corn for ethanol. That is -0.4% from last year. At this time, we do not have efficiency data for this new harvest. We'll use -0.4% as our target for ethanol production. Last week's ethanol production, 1.038 million barrels per day, was +3.4% from last year. The prior four weeks were also positive at +2.5%. We are ahead of USDA's goal.

Exports will be released tomorrow morning, with estimates ranging from +15% to +117% compared to the five-year average of 782,529 tons. To meet the USDA’s export goal of 2.3 billion bushels—up 5% from the five-year average—we need remaining sales to run 10% above average through August. Right now, sales are lagging by 6%, so we’ll need to see strong numbers ahead. Last week's report helps, with a 59% jump, but it's still early.

U.S. corn export bids are losing ground to Brazil in all months, as the dollar rallies, making U.S. corn less competitive globally. Once $20 per tonne in shipping costs are added, the U.S. loses its slight advantage in the first month. In the second and third months, the U.S. holds is at parity and $10 per tonne below Brazil's. Even in the fourth month, where there's some improvement, we are back at parity.

Brazilian corn exports in October are expected to reach 5.68 million tons, according to Anec, down from 8.02 million tons in the same month last year. This represents a 2.8-million-ton decline year-over-year. When looking at the April to October period, total exports are projected to be down 9.6 million tons compared to the same period last year.

Trade estimates for Friday's supply and demand report are in, and they offer some surprises. The October WASDE projections for corn show average ending stocks at 1.962 billion bushels, down from the USDA's September estimate of 2.057 billion. Corn production is expected to be 15.155 billion bushels, with a yield of 183.4 bushels per acre, slightly lower than September's 183.6 bushels. Trade estimates range widely, with the highest projecting ending stocks at 2.1 billion bushels, and the lowest at 1.835 billion. While a tightening in ending stocks was anticipated after the lower-than-expected grain stocks report in late September, a nearly 100-million-bushel cut paired with reduced production now puts us in a position where strong export expectations will be key to keeping ending stocks below the 2.0-billion-bushel mark.

We do have to note that if we look at historical changes from September-to-October yield changes, there's a bias for higher yields in the October report, with many years showing upward revisions. Though we are not looking for this type of adjustment on this report and trade is looking for a small reduction, it is worth noting. However, looking at the overall trend from October to the final numbers, yields tend to move lower more often than not. This suggests that whatever yield we see in the October report could end up being the highest production number we’ll get for this crop.

Corn ratings held steady at 64% good/excellent, matching trade expectations. At this point in the season, ratings give us a decent read for yield modeling. With the end of the ratings period approaching, a few years are dropping off from our Week #40 ratings and yield comparison. If the ratings hold at 64%, that would imply a yield of 182.6 bushels per acre, which is 0.9% higher than the starting trend. For reference, USDA pegged it at 183.6 in September. As for harvest, we’re 30% complete, just shy of the 33% trade estimate, but still ahead of the five-year average of 27%.

The Commitment of Traders report showed that trading funds have significantly reduced their short positions, now sitting at a nearly neutral -67,000 after liquidating 63,000 contracts last week. During that time, we saw a 17-cent rally. A similar move occurred at the start of September, with a 16-cent rally and 65,000 contracts liquidated. In the following week, managed money continued to ease up on their short positions, though the pace slowed, and prices actually dropped by 5 cents. As harvest ramps up, it'll be interesting to see how aggressive the selling is during these rallies.

South American Weather Is Set to Improve, No Large Adjustments Expected Friday

As we move into late 2024, weather models from the Australian Bureau of Meteorology (BOM) and NOAA are picking up on a cooling trend in the Pacific, but their forecasts differ. BOM’s model suggests neutral ocean temperatures will persist into early 2025, while NOAA leans toward a shift to La Niña starting in October and lasting into next year. If La Niña takes hold, we could see cooler, wetter weather in the U.S. Midwest and drier conditions in South America. This is especially concerning for Argentina, as a La Niña event during key growth stages for corn often correlates with lower production.

The latest GFS model run from noon on October 8, 2024, shows that rain relief is on the way for both Brazil and Argentina, but not immediately. For the next 1-5 days, both regions will stay mostly dry, continuing the drought concerns. However, starting in the 6-10 day period, rains are expected to move into southern Brazil and central Argentina, bringing some much-needed moisture. By the 11-15 day range, even more widespread rain is forecast across both countries, particularly in southern and central Brazil and Argentina. This rain could provide critical drought relief and help support early crop growth.

Brazil's first-season corn accounts for about 27% of their total production. For the 2024/25 crop, we still have mixed estimates. USDA’s holding steady at 127 million metric tons for both August and September. Safras e Mercado is more optomisitc, coming in higher with 133.57 million metric tons. Meanwhile, Conab has a more cautious outlook, forecasting 119.8 million metric tons as of mid-September. On the first crop alone, StoneX projects 24.87 million metric tons. There is still a lot of uncertainity around production.

Argentina is generally starting out on the lower side. USDA expects their 2024/25 corn crop to reach 51 million metric tons, while BAGE (Buenos Aires Grain Exchange) offers a more conservative 47 million metric tons.

On the global front, supplies are tightening, with the world corn stocks-to-use ratio for 2024 projected at 24.4%, down from 25.4% last year. While South American production is a bit of a mixed bag, favorable weather could still lead to record output, which might help ease some of the pressure on global stock levels.

Pricing:

Corn finished the day unchanged, keeping us in a range, but leaving us open for a retest of recent support at $4.15. Our 2024/25 balance sheet suggests ending stocks closer to 2.0 billion bushels, just below the USDA’s September estimate of 2.057 billion. This puts fair economic value around $4.45. However, near-term fluctuations could occur with the potential for higher U.S. corn production and improving weather in South America.

Our 15-year seasonal trend is unfolding as expected, though it's running about 18 days ahead of schedule. After reaching a peak in mid-May and mid-June, predicting a sustained rally for corn in July and August is challenging. Adjusting for the 18-day shift, we anticipate a seasonal low in early September. Our seasonal low was posted August 27th, 2024.

Previous studies suggest a high of 512, a fall low of 402, and an eventual ending price of 383. The actual high was 496 ¾, shifting the projected fall low to 390 and the final price to 371.

Corn basis in Central Illinois on October 4 came in at -38 cents per bushel, which is wider than the five-year average of -30 cents for this time of year, reflecting the heavy supplies on hand. Historically, in years like this with abundant supply, we tend to see basis improve by about 14 cents between early October and the end of February.