Commentary
December corn futures rose to two-week highs on strong spillover support from surging soybeans and wheat in my opinion. The corn market is also being driven higher by U.S. ethanol production in my view. Today new data showed ethanol production rose 21,000 barrels per day (bpd) to 1.060 million bpd during the week ended Nov. 12, the Energy Information Administration reported. Ethanol stocks dropped 205,000 barrels to 20.08 million barrels. Over the past four weeks, U.S. ethanol production averaged 1.087 million bpd, the highest four-week average since December 2017. Yesterday, Private analytics firm IHS Markit now projects 2022 U.S. corn acreage at 90.784 million acres, down nearly 1.6 million acres from its forecast last month, according to a report by Reuters. That would be down 2.5 million acres from this year’s corn plantings. Moving forward I’m watching the July/Dec 2022 corn spread. I’ve seen this spread trade to a 40 to 50 cent carry in past years. Today it settled at 33.6 cents, July 22 over. I would like the opportunity to sell the spread at the fifty percent retracement at 62 cents July 22 over. I’m just not sure if it gets there. Near term corn contracts are being driven higher by the aforementioned inflation trade amid strong ethanol demand to name just a few reasons. However, if the thought in the market is that old crop bushels become more plentiful by late Spring due to South American harvests, as well as tepid US corn inspections into China versus lower 2022/23 corn plantings, then I feel this spread can trade to a carry in the weeks and months ahead. I don’t have a specific trade recommendation yet, but watch trendline support at 27 cents July 22 over. A settle below could push this spread to new lows in the weeks ahead in my opinion.
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