Corn futures climbed past $8 a bushel on Monday, with concerns over the loss of exports from Ukraine and lower 2022 U.S. planting intensions lifting prices to their highest levels September 2012.
The market is dealing with diminished supplies “due to the war in Ukraine and the planting intentions of U.S. farmers for the coming growing season,” said Jack Scoville, market analyst at The Price Futures Group. “The potential loss of Ukraine exports of corn makes the world situation tighter and could be enough to keep corn prices trending higher for now.”
“The ports remain closed and Ukraine can rail out to the European Union in limited amounts,” he said.
In Monday dealings, corn for July delivery, the most-active contract, rose 24 cents, or 3.1%, to trade at $8.07 3/4 a bushel in Chicago. A settlement around that level would be the highest since early September 2012, according to FactSet data.
The U.S. Department of Agriculture reported earlier this month that for a second month in a row, Ukrainian corn exports are “sharply reduced.” Since the beginning of the invasion, it said its projections for Ukrainian corn exports have dropped by about 30%.
“The main foreign market for Ukrainian corn in recent years has been China, and it is unlikely that other corn suppliers can fully replace the drop in Ukraine’s exports to the country,” the USDA said. “Chinese corn imports are thereby projected down.”
The USDA also lowered its domestic corn planted area estimate to 89.5 million acres, down 4% from last year, according to its Prospective Plantings report issued on March 31.
Meanwhile, China has a COVID outbreak again and has closed some cities and some ports in response, said Scoville. “The moves are harsh but China has a no tolerance policy about the pandemic.”
He said that closings of cities and ports will “hurt the economy as people can’t make or spend money, and hurt imports as there will be fewer places to unload cargoes.”
Even so, China has been a very big buyer of U.S. corn over the last couple of weeks as they need the feed for animals, and Ukraine cannot currently offer any supply, he said.
President Biden also has said he will permit the use of higher ethanol blends in gasoline this summer in an effort to tame inflation and elevated fuel prices.
The Biden administration said last week that it will allow the summertime sale of gasoline with 15% ethanol, also known as “E15,” in an effort to control inflation and high fuel prices. The move could provide savings of 10 cents per gallon on average, according to the White House. Normally, between June 1 and Sept. 15, only a 10% ethanol blend can be sold due to current regulations.
The corn markets got a “slight boost” from Biden’s announcement, analysts at ArrowStream said in a report issued Monday.
However, U.S. ethanol stocks are currently trending above their previous five-year highs, so “we don’t see this change having a huge impact on corn demand here stateside,” the ArrowStream analysts said. Fuel ethanol is made by fermenting the sugar in the starches of grains such as corn.
Domestic stocks of fuel ethanol were at about 24.8 million barrels for the week ended April 8, according to the Energy Information Administration.
There’s also the possibility that the Biden administration’s plan for the use of E15 during the summer “doesn’t even make it through the courts, as [former President Donald] Trump tried the same thing and it was shot down,” said analysts at ArrowStream.