Mississippi worries ignite post-Wasde plunge on US corn futures

A blockage on a key US supply artery squeezed key calendar spreads and unleashed a wave of pressure on the mainstay Chicago corn futures, reflecting investors' response to a bearish Wasde report and good weather across key growing regions, forcing the contract to hit trade stops across six contracts.

Any prolonged river closure could lead to declarations of force majeure, one source warned, should it starve the key US Gulf export hub of its primary supply route.

But initial fears that the delay on the river could constrain US exports and potentially throw a lifeline to marketing year ending stocks were joined by more conducive weather outlooks for the Midwest and an update to the influential Wasde report that called for better-than-expected 2021/22 ending stocks.

“This is post-Wasde in my opinion,” Terry Reilly of Futures International told Agricensus. “Good US weather and the trade is shifting its focus to new crop corn.”

Every contract from July 2021 out to July 2022 - six individual contracts - hit the newly expanded down limit of 40 cents when investors scrambled to sell ahead of more encouraging production and supply outlooks that turned a slip into a rout.

“This bridge closure in Memphis holding up the barges is huge and crashing the corn spreads,” Charlie Sernatinger of ED&F Man said of the situation earlier in the day.

Cracks on a key bridge across the Mississippi River were reported overnight, leading the US Coast Guard to shut the lower stretch to river traffic Wednesday.

In a press release, the marine agency reported that nearly 230 barges were already trapped in transit.

While the impact was initially felt more firmly on prompt months than on later months, once the falls set in contracts along the curve went into freefall.  

“They could move barges under parts of the bridge, but it will take days to see if that can happen. Some rail trucks will have to be used but logistically it will become a nightmare,” Reilly said, although some sources were hopeful the river could be reopened by Sunday.

But with the river network a key element connecting the corn and soybean producing regions of the Midwest with the primary export hub of the US Gulf, any interruption raises the potential to curb the export pace.

That could boost ending stocks heading into a huge 2021/22 US corn harvest, tipping the balance towards oversupply amid a slowdown in US exports and expectations of big production figures across China, Brazil, Argentina, Ukraine and even South Africa.