Old Crop and New Crop Corn Futures Diverge

Old crop corn futures prices have been rising for several weeks. In the likely event that planting delays in Brazil reduce Brazilian corn exports, the US will have to supply a larger than usual share of global corn exports this year, even as historic levels of demand have caused US corn stocks to dwindle.   

At the same time, new crop futures prices have stumbled slightly as markets anticipate an acreage expansion in 2021. The 2021 July-December corn spread (C N-Z) is currently trading at 69.25 cents per bushel. July futures will largely follow the progression of Brazil’s corn crop and its impact on US exports while December futures will hinge on forecasts of US production for the coming year. 

Brazilian corn exports largely depend on the second crop, or safrinha. Planting of the safrinha  crop has almost caught up with historical norms as drier weather allowed for a rapid planting pace last week. At this point 90% of the crop has been planted, vs. 96% last year, but the late planting makes it more susceptible to yield losses caused by dryness during pollination and/or freezing temperatures during grain fill. Production is almost certain to fall unless growing conditions are near perfect for the rest of the season. Gro’s assortment of climate and weather data can help monitor when the rainy season will end as well as temperature forecasts. 

The US has already committed to export 65 million tonnes of corn worldwide, of which 23.3 million tonnes has been sold (but not necessarily shipped) to China, plus an additional 4 million tonnes earmarked for “unknown”, of which at least half is assumed to be to China. This total figure represents 98% of the USDA’s annual export projection, with almost half the marketing year remaining. Gro expects that the USDA will adjust its export and ending stock projections in future reports, but the extent of the adjustments will depend largely on the size of Brazil’s corn crop. 

With an expected uptick in 2021 US planted corn acreage, new crop futures have since retreated as supplies are penciled in to rebound in the new marketing year beginning Sept. 1. Gro cautions against such an exercise as weather in the US still remains unknown amid a crop that has not fully been planted yet. 

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