Grain Spreads: Xmas in May

Sean LuskGeneral Commentary


If you are planting corn this year or still have old crop corn to sell, todays numbers from USDA were Xmas come in May in my opinion. Don’t get me wrong, there is nothing inherently bullish with an old crop and new crop carry-out of 2 billion bushels. However the numbers were bullish versus expectations. USDA cut old-crop corn carryover 100 million bushels from last month. That’s 78 million bushels below the average pre-report trade estimate. Much of the reduction can be attributed to an increase in 2023/24 exports and corn use for ethanol up 50 million bushels each, leaving overall old-crop carryout down to 2.022 billion bushels versus 2.122 last month.  For 2024-25 corn or new crop, USDA projects carryover of 2.102 billion bu., up 80 million bu. from this year but 182 million bushels below the average pre-report trade estimate thanks to a lower carry-in, as well as reduced acreage compared to the baseline figure. Keep in mind the USDA sees national yield at a whopping 181 bushels per acre. During last year’s El Nino, we had a monster crop due to a wet Midwest post July, that yielded 177.3 on a national average. A 181 to me is a big ask as of now especially with the potential of a La Nina entering into the forecast this Summer. That said, we will see multiple flip flops for Midwest weather into July, the key month for corn production. Wheat also aided corn today and is poised for a breakout amid short covering and a weather premium in Russia. Frost freezes earlier this week with more on the way are concerning and raising questions on production losses with lots of unknowns. A severe frost freeze is on tap this weekend until weather warms next week in the world’s biggest exporter, Russia. Watch wheat to see if it extends up to 7.00 basis Chicago. Near term new crop December 24 corn technical levels come in as follows. Support is first at 4.82. A close under and its 4.67. Under 4.67, its 4.48 to 4.46. Resistance is at 5.04 and the gap at 5.06. A close over next week and its 5.18/19. 

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Sean Lusk

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