Corn and crude oil have diverged recently, with uncertainties around a ceasefire extension between the U.S. and Iran allowing crude to hold above the $90 a barrel threshold, while mostly favorable conditions across the U.S. early in the growing season have sent both old- and new-crop corn whirling lower.
July corn last week fell 29 1/4 cents, notching a contract low on Friday to cap a stunning selloff. December corn dropped 29 cents last week.
But corn has not been alone – funds have pursued the route of decided liquidation across the ag complex, with both wheat and soybeans etching multi-month lows.
On the surface, weather is an easy explanation for the unraveling across ags. Disappointment in the lack of China demand following last month’s summit meeting between President Donald Trump and Chinese leader Xi Jinping has also appeared to trigger some disappointment. Moreover, fertilizer prices have seen a pullback, which has also led to some superficial relief despite lingering global production unknowns.
Most important, with the U.S. on the heels of a large corn crop, and increased production uncertainties, market participants are taking a risk-off stance ahead USDA’s June Acreage Report, due out at the end of the month.
Crude snapshot
It’s no secret, oil supplies are snug due to the ongoing conflict in the Middle East and severe restriction of travel through the Strait of Hormuz. Global supply has dropped sharply in recent months, with cumulative losses since February exceeding 12.8 million barrels per day (bpd), according to the International Energy Agency (IEA) in its latest Oil Market Report. Global inventories drew by 129 million barrels in March and an additional 117 million barrels, according to preliminary data, according to the report.
On the demand side, IEA indicates end users are also reducing consumption, with global oil demand expected to contract by 2.4 million bpd, annually in Q2 and decline annually by 420,000 bpd for the year. Chinese demand is in question; recent reports indicate oil use has declined notably in the country as it likely shifts toward EV’s and subways as opposed to gas powered vehicles.
Meanwhile, the U.S. Energy Information Administration (EIA) forecasts global inventories will decrease by 2.6 million barrels this year and estimates Q2 inventories will fall by an average of 8.5 million bpd.
In the U.S., commercial crude inventories totaled 433.7 million barrels, according to EIA, in data released for the week ending May 29. Supplies plunged 8.0 million barrels, which puts stockpiles 3% below the five-year average for this time. Moreover, the U.S. Strategic Petroleum Reserve (SPR) is currently at critically low levels due to emergency drawdowns. Current fill is estimated at around 51%. U.S. refiners are aggressively processing to meet summer gasoline demand, which has helped gasoline inventories increase modestly recently, but remain still well below five-year averages.
Ethanol outlook
U.S. ethanol production remains robust, with processors having faced solid margins amid elevated oil prices and plentiful corn supplies. Moreover, strong ethanol exports have been key in supplementing global fuel supplies amid crimped global crude inventories.
We would expect that trend to persist, effectively lending long-term support to corn futures. Record ethanol production in 2025 of 16.49 billion gallons was largely achieved by higher blend rates and a notable increase in domestic usage. Capacity has grown in recent months to around 18.436 billion gallons per year, which would allow for potential production growth.
Nonetheless, market participants are treading lightly around corn futures amid expectations of another solid crop, based on current conditions. USDA’s survey-based June Acreage report will provide deeper production insights in addition to potential demand prospects.