Corn Futures on the Rise

Futures investors are bullish on corn. In fact, corn futures for May jumped over 9 cents per bushel recently. Let’s explore what’s happening with corn that is causing this increase in corn future prices.

Weather Issues

The Midwest is expecting some extreme cold weather this week with blizzard conditions in some areas. Freeze followed by thaw, with winds picking up toward the weekend, and very strong winds on Monday, with rain predicted for Tuesday with temps at 28 degrees Fahrenheit (-2°C) that evening. Winter advisories have been issued for west Texas, southern Michigan, and western South Dakota.

The corn belt is expected to see low to mid 20s in several states (mid -6°C), which will have the effect of inhibiting the growth of recently seeded corn. In the southern plains, hard-red winter wheat is emerging from its winter dormancy, and these freezing conditions will likely have an adverse effect on corn production.

In addition, we see corn concerns on the Brazilian front where lack of moisture is negatively impacting second-crop corn planting. A cold front predicted for the southern coast of Brazil may add to the negative impact of corn production in that region.

Demand for Corn

Rising demand from China and Asia have had a significant impact on US corn exports. The USDA’s Federal Grain Inspection Service has seen a 55% increase in corn inspections (mandatory for most exports) for Q1 2021 over the previous 5-year average.

China’s import demand for corn remains high as it restocks grain reserves and plans for increased requirements of feed consumption for its livestock. In addition, China has been falling behind on the Phase One Trade Agreement with the United States. This may be an attempt to shore up the imbalance of trade that has grown between the US and China.

Corn as a Biofuel

Corn is also extremely popular for ethanol production in the US and its use as a fuel has greatly expanded. Ethanol yield per acre is about 460 gallons as compared with sugarcane which yields about 560 per acre. Another reason why corn is in such demand.

Organic Corn

After many years of dependence on global markets for organic corn for livestock production, the US is very close to self-reliance. It is estimated that within the next 5-10 years, US organic corn production will be able to satisfy domestic demand.

All these indicators are working together to boost corn futures. We hope that our Midwest farmers fare well this week with respect to weather concerns and we will continue to keep an eye on corn trading, corn products, and global issues surrounding this important grain.