Corn Futures Rally on Strong Ethanol Data, Analysis & Target
Muhammad Faraz 
Corn Futures Rally on Strong Ethanol Data, Analysis & Target
The key catalyst was the USDA’s National Agricultural Statistics Service (NASS) monthly Grain Crushings report, released Monday afternoon. The data revealed that 488.26 million bushels of corn were used for ethanol production in December, setting a record high for the month and marking a significant 5.1% increase from November. This solidifies a strong pace for corn demand in the biofuel sector. In a supporting move, a South Korean importer purchased 134,000 metric tons of corn in an overnight tender, highlighting steady international demand.
Market Reaction
The corn complex
The Official Narrative
The consensus interprets this data as a clear signal of robust underlying demand from the critical ethanol sector, providing a fundamental floor for prices despite large overall grain supplies.
Interpreting the Move
While the headline supply picture remains ample, the market is correctly focusing on persistent demand strength. The record December ethanol usage is particularly notable as it counters the typical narrative of slowing post-harvest demand. This suggests ethanol margins remain favorable, and blender incentives are effective. The market’s positive reaction, though measured, is justified as it confirms a major demand channel is not just intact but thriving.
Ethanol now consistently consumes over one-third of the U.S. corn crop. This report brings marketing year-to-date usage to 1.863 billion bushels, still tracking slightly above last year’s pace. This isn’t a one-off event but part of a sustained structural demand trend. However, traders remain cautious ahead of Wednesday’s EIA weekly ethanol data, which is expected to show a temporary dip in production for late January
The bullish demand story faces a major headwind: overall U.S. and global ending stocks are projected to be substantial. A single month of strong data does not alter the macro supply-demand balance. The rally could be capped as prices approach key resistance levels, inviting producer hedging activity
What Happens Next
Direct beneficiaries include ethanol producers (PEJ, etc.) and fertilizer companies (NTR, CF) via sustained demand. Conversely, livestock producers and grain users may face slightly higher input costs. Capital may rotate cautiously within the agribusiness sector towards companies leveraged to steady consumption rather than pure crop yields.
Volatility & Sentiment Shift
Sentiment in the grain complex has shifted from uniformly bearish to cautiously mixed. Corn is showing relative strength against soybeans and wheat. Expect volatility to remain elevated around weekly USDA export sales and EIA ethanol reports.
Forward-Looking Catalysts
The immediate focus is on Wednesday’s EIA Weekly Petroleum Status Report for ethanol metrics. The next major catalyst will be the USDA’s World Agricultural Supply and Demand Estimates (WASDE) report on February 11th, which will provide the next official snapshot of the global balance sheet.
The Forecast
Based on sustained demand momentum and technical breakout potential, I predict that July 2026 Corn Futures (ZCN26) will trend higher toward the $4.50 – $4.55 range over the next 4-6 weeks.
Specific Price Targets & Rationale:
- Primary Target (PT1 – $4.45): The first significant resistance level. Rationale: This aligns with the early January 2026 swing high and the 100-day moving average, a key technical barrier.
- Secondary Target (PT2 – $4.55): A more ambitious target if bullish momentum accelerates. Rationale: This represents the major resistance zone from the November 2025 highs. A close above this would signal a potential broader trend reversal.
- Key Level to Watch ($4.34): The prior resistance-turned-support level from Tuesday’s break. Rationale: Bulls must defend this level on a closing basis to maintain the short-term uptrend structure.
What Could Go Wrong
A daily close below $4.28 in the July contract (the February consolidation low) would break the recent higher low pattern and invalidate the near-term bullish structure.
Key Risk Factors:
- Macro Supply: A significant upward revision in U.S. or South American production estimates in the next WASDE report.
- Demand Destruction: A sharp, sustained drop in weekly ethanol production or crude oil prices undermining blender economics.
- Dollar Strength: A rally in the U.S. Dollar Index (DXY), making U.S. corn less competitive on the global market.
Trading Considerations: Any long exposure should be sized appropriately, using the $4.28 level as a logical stop-loss reference. Consider taking partial profits at PT1 ($4.45) and trailing stops for the remainder toward PT2.
The Bottom Line
The record December ethanol usage provides a tangible, demand-side foundation that justifies a shift from a purely bearish corn outlook to a more neutral-to-bullish near-term stance. This fundamental catalyst, coupled with steady exports, supports a grind higher toward key technical resistance.
For traders, the setup favors cautious bullish exposure on pullbacks, with well-defined risk below $4.28. For investors, this reinforces the resilience of the ethanol demand complex within the broader agriculture sector.
What I’m Watching
I will monitor
1) The EIA’s weekly ethanol production and stocks data for confirmation of demand continuity
2) Price action at the $4.45 level to gauge whether there is sufficient buying power to challenge the November highs.
Chart Source: TradingView
Disclaimer: This commentary represents my personal analysis and opinions. It is for informational purposes only and not financial advice. All investments involve risk, including loss of principal. Conduct your own research and consider your financial situation before making any investment decisions.
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