What Caused the Meltdown in the Corn Market This Week?

Reaction to USDA’s March crop production report, along with concerning signs from the Federal Reserve, were the big drivers of commodity prices this week. During the live taping of U.S. Farm Report during Commodity Classic, analysts say outdated information about fund positions and outside money might have also been a catalyst for the large price swings farmers saw in corn this week.  

On Wednesday, the USDA report initially fueled soybean prices. Arlan Suderman of StoneX Group says even though Argentina’s crop was already projected to be small, USDA cut another 7 million metric tons from corn and 8 million metric tons from soybeans, which was then followed by an updated report from South America that also projected a smaller crop.  

Suderman says there were also headwinds from the outside markets as recession worries pop up again.

“That eventually caught up to the markets and created problems for soybeans trying to hold onto those gains,” Suderman says.

Chip Nellinger of Blue Reef Agri-Marketing thinks the comments from the Federal Reserve caused corn prices to tumble this week.

“The markets were OK until earlier this week when Federal Reserve Chairman Powell spoke and really was hawkish, saying we have to keep these rates high for a long time, maybe higher than what everyone thought initially,” Nellinger says. “That seemed to let a lot of wind out of the different commodity markets.”

The other bearish piece of the price puzzle this week might have anchored the wheat market.

“The wheat market is just imploding, and corn right now is unfortunately tied to the hip of the wheat market. I think wheat is getting closer to a fair value. Once it does bottom, I think that'll take some pressure off of the corn market,” Nellinger says.

The fundamentals moving the market are one thing to debate, but 2022 was proof the funds and outside money can also push prices heavily to one side. Typically, USDA releases a weekly “Commitment of Traders” report, which reveals the position of the funds.

The report can be a key piece of information for market watchers, but according to the Commodity Futures Trading Commission, a cyberattack on their system in early February took that report offline. Analysts say that information still isn’t up to date.

“Bottom line is we don't know what the fund positions are because we haven't had a Commitment of Traders report for quite a few weeks,” says Mike North of ever.ag. “So we're only guessing. On a daily basis, most of the people who track trade and what's going on can give you a rough estimate of what the funds have done, but that's it. It’s completely a finger in the air guess on what's going on.”

The demand side of corn is also bearish for prices, as North says corn demand is very concerning. He says between the decline in corn exports, the loss of 50 million birds due to avian flu and the small beef herd, corn demand continues to wane, as USDA revealed with revisions in the latest crop report.