Market Commentary for 4/16/25

Jon Scheve with weekly market commentary made on April 11, 2025

The USDA released their updated supply and demand estimates after the stocks report nearly 2 weeks ago. Carryout was tighter than many in the trade were expecting. I was anticipating a bigger decrease in corn used for animal feed to offset any export increase. With what we know today, most in the trade seem to find the increased exports number reasonable.

I feel that the decreased carryout should have caused corn to rally at least 10 cents immediately after the report was released; however, it only went up a few cents. And while it did close on Friday another 7 cents higher, I thought it would have been a lot more. Friday’s rally was probably due to the US dollar dropping, which makes US exports more affordable globally.

I was also surprised the May to July spread didn’t tighten up and instead widened more than before the report. If supply is as tight as the USDA suggests, then the spread should have narrowed as end users look to shore up more supply. This could be indicating the rally is running out of steam.

Reasons to Believe the Corn Rally Will Continue

One positive for corn is that it has finished 9 of the last 11 trading sessions stronger, which this chart shows:

However, two months ago corn had a run where 9 out of 10 trading sessions were lower. Unfortunately, corn hasn’t rebounded back to the high posted on February 20th.

Why Not?

Looking back all the way to July of last summer, funds were short just over 350,000 contracts due to the excess grain from the previous year that was still in storage and the widespread good weather during pollination. At that time, corn traded down below $4.00.

 As dry weather increased from late July through harvest, funds started buying and by February 20th they were long 350,000 contracts, a 700,000 contract turn around. Now two months later, they have sold most of their positions and are only long about 50,000 contracts.

What Spooked the Funds?

It seems that many of the funds are concerned about the tariffs, threats of a trade war, and increased fees on ships going to ports in the US that are registered or built in China. While politics can be spun from both sides, usually big money focuses more on how to make the most money they can after factoring all potential outcomes and returns instead of listening to political rhetoric from either side.

Historically, tariffs have been a direct tax on the citizens of the country who set them. And for the last 90 years, the US has mostly tried to remove them because they are a barrier to trade and artificially raise prices on our citizens. This recent policy change is a complete reversal of decades of trade policy, plus the implementation and duration of the strategy hasn’t been very clear. The funds and the markets in general don’t like change and uncertainty, which is making trading a challenge for them.

Right now, there is a lot of fear in the market that this sudden 10% tax on all goods coming into the US and the 100%+ tax on Chinese goods will increase inflation and the potential for a global economic downturn. If this happens, business profits could take a hit, which could mean workers potentially getting laid off and having less disposable money. And less disposable income usually means less spending on everything including food, which would impact the livestock market and grain purchases.

While the goal of the tariffs seems to be to bring back jobs to the US, logistically it would take years to build up factories and hire personal to work in them. The funds are likely looking at what happens in the shorter period of 6 months to a year.

Will Funds Jump Back into Grain?

I don’t expect funds to short corn in the next few months, and if they do, I doubt it will be much. Going short right before the growing season would be an unusual time. Plus, with so much uncertainty in the market right now, it’s understandable why many probably won’t want to take on more risk in either direction. 

However, if there was a widespread weather event that significantly impacted supply, they may jump back in quickly. Weather uncertainty impacting the market is probably a month away, or maybe even longer if Brazil has normal weather in early May.

War Is Hard to Predict

The market had a difficult time figuring out the impact of the Russian invasion into Ukraine on the market. Similarly, the economic war being fought between China and US will be a challenge for the market to overcome right away. There are a lot of theories how this will play out, but history has taught us that war is unpredictable and strange things can happen. I expect there will be more surprises to come.

Bottomline

The USDA report this week was positive for corn. It would be great if corn retested the highs of nearly $5.20 from almost 2 months ago. However, there are a lot of economic unknowns to assume that corn must rally.

Jon Scheve

Superior Feed Ingredients, LLC

9358 Oak Ave

Waconia, MN 55387

jon@superiorfeed.com