Corn ended slightly lower for a second consecutive session, but March has so far maintained support above its 20-day moving average. There are hints that a wetter pattern lies ahead in mid-January for Argentina, but net draws in soil moisture will persist there over the next 10 days. Key next week will be whether rainfall in the extended forecast is pulled forward in time?
Similarly important, spot crude today settled above $60/Barrel for the first time since June of 2015, and the rally continues to be driven by declining US inventories. Gasoline’s premium to ethanol is a solid $.50/Gal and ethanol consumption will remain stout in 2018.
Longer term, the need for US oat, sorghum, barley & cotton acreage in 2018 places more uncertainty over US corn seeding, and more than in recent years whether major exporter surpluses rise or fall in coming years is far from certain. ARC maintains that downside risk is limited until early harvesting begins in South America in March. Managed funds are short 207,000 contracts, down 16,000 from the prior week but compares to 114,000 contracts on this week a year ago. Corn prices hold limited downside price risk.
