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Corn feed demand wanes, exports ‘okay’

Corn

Demand for feed corn has decreased lately as the number of cattle on feed has also gone down, according to the latest cattle on feed report from the U.S. Department of Agriculture. That said, export demand for corn is still doing “okay.”

“We’re losing some of our demand for corn. The cattle on feed report showed some of the lowest levels of feeder cattle that we’ve seen in a long time,” said Betsy Jensen, Northland Farm Business Management and a producer/marketer from Stephen, Minn. “We need that cattle market to be big consumers. Half of our corn crop goes to feed and so we do want to make sure that we have animals to feed.

“This last cattle on feed report kind of caught the market off guard. We thought there was going to be more cattle out there,” she continued. “I know there are a lot of grain farmers out there who maybe don’t pay attention to the cattle market, but they are huge consumers of corn and right now it’s a little bit of a concern.”

Besides having fewer cattle at this time, Jensen also noted that ethanol production seems to be staggering a little, as well.

“High prices will slow down demand and it looks kind of like that’s starting to work a little, so we’ve got to keep an eye on demand. I’m a little concerned about demand,” she said.

Elsewhere, Ukraine continues to be in the news with Russia and Ukraine agreeing to extend the Black Sea Grain Initiative for 120 days. The agreement provides a shipping corridor for Ukraine to export agricultural commodities from the Black Sea.

Ukraine is also in the news because, even though it’s not a huge corn producer, the country’s farmers are struggling to get their corn harvested.

“Ukraine is about half harvested with their corn and they should be almost done. I don’t know how excited most farmers would be to combine corn during a war,” she said. “But, also, there’s not a big incentive to go out there and harvest the corn.”

While the agreement is seen as positive, there is some concern over whether or not it will hold.

“We’ve been fooled by this a few times. This corridor hasn’t always worked and everyone is just a little skeptical about the news coming out from Russia and Ukraine,” Jensen said. “Are these agreements really going to hold? So there’s a lot of skepticism right now about whether or not the export corridor will remain open.

“Exporting is very difficult right now for Ukraine, so the Ukraine situation is helping to prop up corn a little bit,” she added.

Besides trying to harvest, or farm in general for that matter, during a war, and wondering about a shaky shipping agreement, Jensen pointed out other issues facing Ukrainian producers, including a fuel shortage.

“Imagine you’re a Ukrainian farmer and you do not have any fuel even to fill up your combine. There’s just no availability for fuel. I mean, how often have our farmers had to deal with not having the availability of fuel? We complain if our fertilizer is a day late,” she said. “It’s more than just the export corridor for Ukraine. I can’t imagine the situation that their farmers are in right now and that is impacting the world market. Let’s hope that this resolves itself and Ukraine can get back to normal soon.”

In the near-term, Jensen noted the potential for a rail strike is a big issue for corn and soybeans. A strike would impact transportation to the ports and slow exports. The rail union and President Biden’s administration are working to avoid a strike, but at this time it’s still up in the air.

“Who knows what’s going to happen with that. That’s something to yet be determined,” she said.

As winter approaches, Jensen said it’s a good time for producers to consider marketing plans. She noted that corn futures for 2023 are over $6, which is a good price.

“If (producers) want to make some forward contracting, 2023 corn is over $6 and most years we’re thrilled to have $6,” she said. “So if you don’t have anything sold for 2023, I think that’s worth looking at. I know the market is inverted, we get less for 2023 than we do today, but a $6 contract could certainly be attractive next fall at delivery.”

Local cash prices in the Stephen, Minn., area are $6.25 cash, which is “pretty good,” Jensen said.

“I’m very impressed with how strong our basis has held together. It’s been a unique situation this year,” she said. “At harvest I know there were some great basis offers if local demand was good from an ethanol plant or a feed plant, but our basis has been holding together pretty well this winter despite all the shipping delays and the potential rail strike.

“I’m impressed with corn,” she added.

At one local elevator in west central Minnesota regularly followed in this column, as of Nov. 22, December cash corn prices were listed at $6.53 and basis was -8 cents under. The July 2023 corn futures prices were listed at $6.58 and basis was +1 cent over.

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