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Corn market a tale of two corns

Corn market a tale of two corns


Most of the market attention leading up to the March 31 Prospective Planting Report dealt with the highly anticipated report from USDA that would include not only 2021 planting intentions but also stocks information. But the corn market was also paying attention to a tale of two corns, one old and one new.

“I know we’re going to be looking at acres and stocks coming up in the report, but keep in mind there will be a definite line between old crop and new crop,” said Betsy Jensen, Northland Farm Business Management and a producer/marketer from Stephen, Minn., adding there will be significantly tight stocks for old crop corn. “There’s a significant inverse between old crop and new crop and I actually anticipate that getting wider.

“If a farmer … has old crop corn and new crop corn, they are almost completely different commodities,” she continued. “It is possible that the stocks and acreage report can be bullish for one and bearish for the other. They’re cousins, but they are not the same commodity.

“I just hope farmers realize that something can be incredibly bullish for old crop, but if we plant high acres of new crop, it’s not going to help our December prospects, so it does make the marketing a little unique,” she added.

Looking ahead to planting, Jensen thinks that farmers are going to plant a significant amount of corn acres. One of the reasons she anticipates that is because a lot of the fertilizer was already applied last fall.

“Overall, the U.S. had a great fall for field work and so a lot of fertilizer was already applied. If you’re going to put that much money into the ground already, I don’t know how you’re going to plant soybeans on that,” she explained. “Whatever farmers anticipated last fall, it’s going to be difficult for them to change their minds. I’ll be interested to see just how much they end up planting. The soybean market is going to have to go quite a bit higher to convince farmers to change their mind.”

Just as planting is beginning in some areas around the region, the concern right now – even though it’s still very early – is that it’s still dry. Jensen pointed out that “a bunch of Minnesota is kind of in a slight drought, and a good chunk of Wisconsin,” as well as North and South Dakota.

“The market would like to see a little bit of rain just to reassure them that corn can get germinated when it does get seeded,” she said. “The dryness is a little bit of a concern, but of course, one rainfall could certainly solve that problem.”

Looking at local prices, Jensen noted there’s about a dollar difference between old crop and new crop. Local cash prices are about $5.10 old crop and $4.10 new crop.

“So it’s a dollar more if you happen to have corn in the bin today. I do anticipate that getting even wider. I think that spread could actually go to $1.50,” she said.

At one local elevator in west central Minnesota regularly followed in this column, as of March 29, April cash corn prices were $5.21 and basis was -25 cents under. September 2021 corn futures were $4.79 and basis was -5 cents under.

On the demand side, China continues to be very aggressive at buying.

“It’s hard to turn them down, but honestly, Japan has also been a large buyer of U.S. corn. Japan actually led export shipments last week,” she explained. “I know we talk a lot about China, but Japan is also buying a significant amount of our corn, as well, so it’s kind of a good trade overall. We’re doubling what we’ve shipped out since last year, so it is a much brighter picture for corn at this time.”

Also, corn exports are running twice the pace of a year ago.

“USDA is calling for an increase, but not a double of export sales, so we are significantly ahead of our export sales pace,” Jensen said. “There’s just been such good demand for our old crop that stocks are really tight and whether or not the market can hold out until we have new crop harvested remains to be seen.”

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