US CBOT maize (corn) prices have started to recover since May, following an unprecedented decline in prices during March and April. Prices fell to a decade low in April due to weak demand particularly from the ethanol industry as the country went under lockdown in order to contain the spread of coronavirus.
Demand for fuel and gasoline responded positively to lockdown easing, leading to higher ethanol production as part of the fuel blends with gasoline. As approximately 40-50% of US-maize is used as ethanol feedstock, the rise in ethanol consumption prompted a price recovery of maize. The benchmark rose by $4.5/MT (+3.6%) to $129.5/MT between the 29th April and 3rd June.
Although it seems maize prices have bottomed out, a strong bullish environment is highly unlikely for H2 2020. The USDA forecasts the US 2020/21 maize crop at a record 406 million tonnes, following an increase in planting area. If materialised, this would be an increase of 17.5% y-o-y. Besides, maize ending stocks are expected to rise by a significant 58% to 84 million tonnes in the next season compared to 2019/20, weighing further on any potential price surge.