Contrasting fundamentals divides soy, corn futures contracts

The divergence in the fundamentals underpinning US corn and soy markets saw prices on the Chicago Mercantile Exchange head in different directions Monday, with the front month CBOT soybean contract jumping up 10 cents while corn prices once again faced renewed pressure.

The front month December CBOT corn futures contract was down 3 cents/bu at time of writing to $3.4175/bu, while the January CBOT corn contract had eased back after early gains to reach $10.0275/bu.

Because of the close relationship between corn and soy, in that they are widely farmed on the same regions in the US Midwest, Argentina and Brazil, a rise or fall in crop one will often prompt a similar response in the other.

While soybean prices were further charged through Monday trading by fears surrounding South America’s weather, with the dryness in key regions raising fears for the health of the crop, corn failed to follow suit.

A difference in the demand picture also helped underpin that divergent move, with US soybean export inspections surprising the market with higher-than-expected volumes of 1.8 million mt while corn once again failed to deliver – 586,213 mt below expectations.

However, the current fundamentals for corn broadly reflect an oversupplied market, with limited demand – despite corn-growing regions also suffering from similar weather concerns, there is enough corn in stock to limit the upward momentum.

“The US framer wants to plant corn, and he will always plant corn,” one trading source said, pointing out that the dryness in South America that is having such a supportive effect for soy may also delay the second Brazilian corn crop, typically planted between January and March for harvesting in May through September.

“The delay and the dryness affecting the second Brazilian corn crop runs counter to fundamentals, but realistically… the market confidence right now is that we’re not going to run out of corn,” the source continued.