Like any commodity, corn prices are influenced by supply and demand. The basic principles affecting price are outlined in the table below. Data on global supply and demand or for major producing countries can also be found in important USDA reports, published monthly, annually, and quarterly.

In addition to production, the area planted in major growing countries, or demand from the highest-consuming nations, stock-to-use data (ending stocks minus demand or stock-to-use ratio) provides insight into the amount of current supply meeting this year's demand, often inversely related to price. Monitoring this data in both supplying and consuming countries is crucial.

Source: Principles of macroeconomics

Regarding supply, attention should be paid to production in major regions such as the U.S. (through USDA reports) and South America, including Brazil and Argentina (USDA or CONAB reports). Additionally, the Black Sea region, including Ukraine, is a top corn producer that should be monitored. These are also leading corn-exporting countries. Any disruptions in corn production in these key regions will significantly impact corn prices. Such disruptions can result from adverse weather conditions affecting planting or any stage of corn development. In 2021, drought conditions in South America significantly impacted supply prospects, leading to a sharp increase in global corn prices.

Each stage in the growth process of corn is influenced by or prefers certain conditions. For instance, in the U.S., before planting, corn needs ample rainfall to provide soil moisture; heavy rain during planting can affect planting progress; during the tasseling stage, cool weather is needed for pollination; and during the early harvest stage, rain is needed for final development. This is why the USDA releases weekly planting progress reports, which are important data sources for assessing corn prospects by observing related factors, and why weather conditions are also critically important.

Source: Internet

As mentioned, not only the U.S. but also other regions like South America and Ukraine are major corn producers. However, due to differences in geography, weather conditions, and planting practices, their growing seasons differ. The stages approaching harvest usually have a larger future supply potential, while during planting months, supply mainly comes from the old crop. According to CME Group, grain contracts will have one month of futures contracts for the new crop and the rest for the old crop.

Source: MXV

Regarding demand, the import market share and domestic consumption figures of various countries are crucial data, as economic fluctuations in these countries can impact consumption demand. Additionally, other factors that reduce domestic production can affect imports, thereby increasing the demand for corn. According to the latest USDA data, corn consumption in the U.S. and China is nearly equal, each accounting for 26% of global consumption.

China is often blamed for driving up global corn prices due to its massive annual imports, especially during periods of sudden demand spikes. Despite being a leading producer, China's domestic production cannot meet the needs of its large population. Additionally, corn is used as feed for the largest pig population in the world. In the 2021/22 marketing year, China became the world's largest importer, accounting for 16% of global trade, compared to an average of only 3% in the previous decade.

In 2021, China had to import a substantial amount of corn to replenish nearly depleted reserves, amid various challenges related to corn supply. On one hand, Beijing was in the process of restocking its pig herd, and corn is a crucial ingredient for animal feed. China’s pig population is extremely large, with over 400 million pigs according to the Ministry of Agriculture and Rural Affairs of China as of March 18. Another important point is that China typically imports corn from two main sources: the United States and Brazil.

As mentioned, stocks are an important data point to monitor, indicating whether the market is tight or not. Low global stocks will positively impact prices, and similarly, monitoring countries with high stock ratios (such as China) is crucial, as low levels may lead to increased imports. According to USDA data, China's ending stocks for the 2024/2025 season are estimated to account for 68%, the largest in the world, significantly higher than the U.S., which is at 17%.

For instance, an analysis by StoneX showed that in 2019, the stock-to-use ratio of 15% created pressure. In 2020, the supply was tight with a stock-to-use ratio below 9%, the tightest since the 2012 drought. By 2023, this ratio had returned to over 15%.

In 2021, although stocks were more comfortable, prices continued to rise until 2022, when the ratio fell below 10%. Once the ratio exceeded 10% again, prices started to decline. Thus, a 10% ratio is seen as a signal of whether supply is tightening or not. The stock-to-use ratio can serve as an early indicator.

Source: Internet

The volatility of global crude oil prices also affects corn prices and often moves in the same direction, as corn is used to produce ethanol blended with gasoline. Therefore, when fuel prices rise, it can encourage more corn to be used for ethanol production, particularly in the U.S., thereby increasing corn prices. A document from Petrotimes states that the average blending ratio of ethanol and gasoline in the U.S. in 2012 was 7.5 billion gallons per year, and the total volume of blended ethanol is allocated specifically to each state and company based on the previous year's sales. The U.S. also plans this blending ratio annually, but companies are not allowed to exceed this ratio. A higher ratio compared to the previous year is an indicator that producers are encouraged to use more corn for ethanol production, which impacts corn prices. The U.S. Energy Information Administration (EIA) reports weekly ethanol production along with inventories and WTI oil production on Wednesdays.

The fluctuation of the USD plays a crucial role in the pricing of grains. When the USD strengthens, it makes corn more expensive for foreign buyers. Importers are very sensitive to this issue as it impacts profit margins or financial costs for businesses. As a result, demand for corn may decrease, affecting its price. Conversely, a weaker USD can make domestic corn sellers' prices more competitive, often leading to higher corn prices. Additionally, since corn contracts are also traded on financial markets, a stronger USD increases the attractiveness of this asset to investors compared to others, including corn futures contracts. It is important to note that USD fluctuations are also influenced by Federal Reserve decisions (including interest rate decisions), which are based on key economic data such as Non-farm Payrolls (NFP).

Besides the USD, corn prices have also fluctuated according to the Brazilian Real and the Russian Ruble over the years. However, a 2021 CME Group article indicates that this volatility has differed compared to previous periods.

Logistical issues are also a significant factor influencing global food price increases. For example, the Suez Canal incident in 2021 and the historically low water levels of the Parana River in South America disrupted the transportation of key agricultural products from the region to the Rosario export hub, as ships could not operate at full capacity under normal conditions. Similarly, congestion on a section of the Mississippi River in the U.S., an important waterway for transporting crops like soybeans and corn from the Midwest to major export ports around New Orleans, affected logistics.

Additionally, the impact of financial trading, particularly by money managers, is noteworthy. According to StoneX, funds maintained a dominant short position from late 2019 until nearly the end of 2020. This changed when China began significantly purchasing U.S. corn on the export market. The increase in export demand shifted the U.S. from a market with ample supply in 2019 to a market with tighter supply by the end of 2020. Consequently, funds transitioned to a substantial long position in less than a year.

Source: Compiled