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Short Term Looks Strong as Exports Drive Corn Prices

Sean Brown

What the Latest USDA Export Inspection Report Just Did for Grains

Corn prices rise

CBOT (Chicago Board of Trade) corn futures for March delivery increased by nearly 1.9% and settled at $3.63 per bushel on February 16, 2016. Corn prices advanced with the anticipated short-term strong export demand cues from the USDA’s (US Department of Agriculture) weekly export inspections report. ETF like Teucrium Corn Fund (CORN) followed prices on CBOT and rose by 0.76% on February 16.

Speculation of stronger demand

According to the USDA’s report, the weekly inspections for corn in the week ending February 12 registered ~691,000 metric tons, which is 50.1% higher than last week and about 16.3% higher than the previous two-week average. The marketing YTD (year-to-date) corn exports of 13.1 million metric tons represent about 20% less than this time last year, but speculation of stronger demand in the near term supported corn prices on February 16, and analysts believe that due to delays in Brazilian shipments, delays in US corn could attract demand.

Weather matters

Weather conditions in South American corn-producing regions are currently favorable, given precipitation. These recent favorable weather conditions have also revived the hope of stronger corn production from Argentina, which had been suffering from a dry spell. The Rosario Grains Exchange, in its latest estimate, anticipated an increase in corn production by ~400,000 tons to 24.2 million tons for the marketing year 2015–16. But speculation that such favorable weather conditions might support more output and hurt US corn by raising competition wound up cutting back corn prices on February 16.

Stock reactions

The overall rise in corn prices has supported businesses engaged in corn producing and trading, boosting inventory values as well. On February 16, Archer Daniel Midlands (ADM), Ingredion (INGR), Tyson Foods (TSN), and Bunge (BG) rose by 3.6%, 1.5%, 2.7%, and 1.3%, respectively, and the PowerShares DB Agriculture Fund (DBA) rose by 0.81%.

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