• Using the Law of Supply and Demand and national average basis, we know the National Corn Index (national average cash price) indicated the US had ample supplies of corn on hand at the end of May. 

• Some of these supplies will be carried over into new-crop, increasing the pressure on the September futures contract. 

• New-crop futures spreads have told us the US was going to plant more acres in 2025, and that those acres went in early. 

During my appearance on RFD-TV Wednesday my friend and host Tony St. James asked me what my favorite market was these days. My answer was what it almost always is: Corn. Why? Just as some investors prefer to trade bonds over equities based on more liquidity, less volatility, and seemingly making more sense I, as someone involved in long-term investments in the commodities complex, prefer corn for the same reasons. It also comes to what Peter Lynch used to say, invest in what you know. My last 20-some odd years of living in the US Corn Belt has helped me know a lot more about corn than the other commodity markets. Part of this knowledge is the US being the largest producer, user, and usually exporter of corn. 

Sticking with the theme, what do we know about corn’s real supply and demand, both old-crop and new-crop? From a long-term investment point of view, it’s important to keep in mind there are real fundamental reads and then there is USDA’s imaginary version that tends to cause short-term spikes, either up or down. Most of the industry will be focused on the latter with USDA’s next round of guesses set for release Thursday. What you decide to believe is entirely up to you. 

Let’s start with the old-crop market. Here I’ll start by applying the Law of Supply and Demand we learned in Econ 101 back in our university days. (For some of us, me included, I’ll say “way back”.) I’ll also add it interesting/amusing that most of the folks running around calling themselves “economists” seem to have forgotten this simple law. But I digress. The Law of Supply and Demand reminds us that market price is the point where the quantity demanded equals quantities available creating a market equilibrium. My take on this Law is tweaked by looking at “available supplies” rather than “total supplies”, an important distinction in the Grains sector given supplies can be held off the market in on-farm or commercial storage. If we consider the three variables in the equation (Market Price = Supply, Demand) the only one known is Market Price. Therefore, a study of Market Price is all that is needed to understand the relationship between the unknown variables of Supply and Demand.

At the end of May, the National Corn Index (($CNCI) was priced near $4.20, putting available stocks-to-use at 12.6%. This was slightly above the previous 10-year average end of May figure of 12.2%. Given the end of May also brought Q3 of the 2024-2025 marketing year to an end, we can compare back to what we saw at the end of Q2. The close of February saw the index priced near $4.27 with available stocks-to-use at 12.4%. While these numbers might take some of the fun out of what I like to call “The 300 (400) Consistency” (USDA tends to find or lose 300 mb to 400 mb of corn based on “trade estimates” from the “experts”). The bottom line is as the calendar page turned to June, the US had ample supplies on hand to meet demand. This knowledge is confirmed by the national average basis market continuing to run neutral to week, based on weekly closes only the past 5 year to 10 years. 

What do we know about the 2025 crop? Let’s start at the beginning:

• Tracking the Nov25 Soybean/Dec25 corn futures spread from the beginning of last September through the end of this past February, we know Dec25 corn bought US planted area away from Nov25 soybeans. The spread posted an average weekly close of 2.31, below the previous 10-year average for that time frame of 2.4.
• Turning our attention to the September (ZCU25) -December (ZCZ25) spread, we see it has fallen from a high daily close of 6.75 cents carry in mid-April (planting season) to a low of 16.75 cents on Thursday, June 5. This tells us that a large percent of the increased corn acres was planted early, with the spread reflecting the idea more bushels will be priced against the September futures contract. In addition to the ample carryover supplies from old-cop.
• The Sep25-Jul26 (ZCN26) futures spread, the 2025-2026 marketing year forward curve, has seen its carry strengthen from 29.25 cents on Monday, April 14 to 47.5 cents on Monday, June 9. Another way to look at it is the spread moved from covering 28% calculated full commercial carry to 46%. This tells us the commercial side has grown more comfortable with 2025-2026 supply and demand, for whatever reason. 

As a long-term investor, when a market shows all the signs of increasingly less bullish, or even bearish real fundamentals, the strategy is relatively clear. With this in mind, it is not surprising the noncommercial side has moved to a net-short futures position in corn and showing no fear of increasing that position. Regardless of USDA’s imaginary numbers this week. 

Back to the idea of knowledge, my friend Tony knew what my answer was going to be, and used it to highlight Wednesday as National Corn on the Cob Day.