The leap year’s extra day in February provided another one with misery for crop prices on both sides of the Canada-U.S. border.
Whether canola, corn, wheat or the Chicago soy complex, all May contracts were under their respective 50- and 100-day averages, and all had large net short positions as of Feb. 29. Each one hit a new contract low during February, with any sign of positive momentum quashed after two or three sessions before returning to a downturn.
With the exception of May soymeal, all at one point had a relative strength index below 30, indicating the contract was oversold.
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While observers wait to see if all these contracts will reach a bottom, one may have turned a corner.
Since plunging to US$4.0875 per bushel on Feb. 23, the May corn contract at the Chicago Board of Trade had its longest rally in more than a month, making gains in four straight sessions. The contract traded as high as $4.32 before ending February at $4.2875, still a loss of nearly 30 cents from the beginning of the month.
Exports were cited as a cause for corn’s rebound. Old-crop sales for the week ended Feb. 22 were 1.082 million tonnes, up 32 per cent from the week before. The U.S. Department of Agriculture anticipates 53.34 million tonnes to be exported in 2023-24, compared to 40.64 million in the previous year. Word of increasing Chinese demand for U.S. corn may also support prices.
Average U.S. daily ethanol production for the week ended Feb. 23 was 1.078 million barrels per day, according to the Energy Information Administration, which marked 37 out of the past 40 weeks in which the average surpassed one million.
Dry conditions in the U.S. Corn Belt as well as in South America, not to mention estimates of 2024-25 U.S. corn acreage at below 90 million, may also affect prices. One surprising factor is the increase in sorghum demand. U.S. exports of the drought-tolerant crop are expected to more than double in 2023-24 to 6.096 million tonnes compared to the year before, while ending stocks decline to 558,830 tonnes.
Some farmers may be inclined to sell their corn for the sake of cash flow before Brazil’s safrinha crop reaches the market. However, prices are attractive to buyers and the amount of potential support may convince many to take the leap.
