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MARKETS:
Corn Spreads to The Edge of Reality

Corn calendar spreads, already weak, likely weaken further.

SUMMARY

  • Corn calendar spreads are either making new lows or not far from it.
  • We are a few weeks away from when the next seasonal zag usually kicks in.
  • The US Corn Belt’s recent wetter and cooler weather might be a handbrake on the timing.
  • Most likely though, spreads will resume their decline.

Corn Spreads to The Edge of Reality

Corn calendar spreads are either making new lows or not far from it. Both within season and cross-season. The December-Mar (Z-H) and March-May (H-K) spreads are shown in the charts below.

We are a few weeks away from when the next seasonal zag usually kicks in. That mid-July timing is, obviously, no accident. Generally by that time the market has good visibility on the weather for corn’s critical development window. On the other side of that window, the market will have a greater certainty about crop forecasts. And, consequently, supply shifting from somewhat tight to the gray area between tight and neutral in our view.

Of course, every season is a little different. Spreads for season 2025 have been a little ahead of schedule. Continuing that form would suggest the next zag starts earlier. However, we think there is reason to think that form might not continue. The US Corn Belt has recently been broadly wetter and cooler than usual. The impact is to slow crop development, nudging that critical window deeper into July. Karen Braun’s Reuters column recently discussed some examples. That shift might be a handbrake on the timing – but only the timing.

We think it most likely that corn spreads will continue making new lows. The mantra ‘rain makes grain’ is a mantra for good reason. So, as US weather normalises to summer, crops will use that abundant moisture to deliver hefty US yields. While new lows beckon, we do not currently expect them to be hugely different from the old lows. The market’s task is still likely more about carrying corn through, rather than beyond, the season. Price levels are on the low side already but have room to fall.

Where’s the risk? As ever, there are several. Perhaps the most damaging to the ‘new lows’ view is if summer fails to launch. So, US summer 2025 comes to be remembered as the Insufferably Soggy Summer. To be clear, we have no reason to think summer will fail to launch. Chances are, summer will be summer. We raise the possibility though because it is a path that would prevent:
1. the market gaining confidence in its current US corn crop forecasts, or
2. the market, potentially, embarking on a series of upgrades to its US corn crop forecast.

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