US corn has managed to escape the sharp slide seen in soybean prices since the start of August. Front month prices have dipped just 1.3% in corn since the start of this month, compared to a nearer 11% drop in soybean prices over the same period. Corn has benefited from its relatively small exposure to gyrations in export demand as China’s stockmarket travails have loomed increasingly large on the macro-economic scene, with concern over a slowdown in export demand registering much more strongly on the soybean market. Exports are expected to account for only around 12% of overall corn demand in the new crop year, relative to the nearer 50% share of the expected offtake which USDA forecasted for soybeans before the worst of China’s wobbles erupted from mid-August.
Another major prop to the corn market this summer, domestic blending demand for ethanol to keep pace with the strongest US gasoline consumption in years, is inevitably running out of steam as September approaches. Ethanol production has been in shallow decline since peaking in May, with suppliers digging deeper into stocks to keep pace with even steeper gasoline refinery production and stock draw profiles. The latest DOE weekly data showed implied gasoline demand slowing sharply as production dropped 4.5% WoW, accompanied by a near 1% rise in stocks. US ethanol stocks remain nearly 5% above their five year average relative to gasoline stocks up just 1.5% relative to the five year mean. USDA increased its expected ethanol uptake of corn in its August WASDE relative to a shrinking 2015/2016 corn crop. USDA expects US ethanol to consume 38.6% of US corn production in the new smaller corn footprint crop year, up from a 36.6% market share in the larger 2014/2015 crop year. The recent slump in the value of the Brazilian Real relative to the US dollar meanwhile is doing little to encourage exports of US ethanol relative to rival Brazilian sugar cane product.