Although soybeans get most of the attention in discussions about the Phase One trade agreement between the U.S. and China, corn garnered a lot of attention after China made two very large purchases of corn.

“We’ve had a little bit of strong demand with corn. China came in two weeks ago and bought a significant jag of corn, some of the largest purchases on record,” said Randy Martinson, Martinson Ag Risk Management, Fargo, N.D., on July 21. The first sale was for 1.3 million metric tons (MT), and the second purchase of 1.7 million MT was the single largest sale of corn in 20 years.

However, news of the sale didn’t spur the market.

“This market didn’t seem to really take that into high regard. We just kind of glossed over that, not thinking that it was very supportive to the market,” he said. “The market knows that it needs the demand, so that export sale was very much needed, especially after seeing some of the reductions that USDA just came with in their July crop production report with feed demand being cut and with the ethanol cuts that we’ve seen so far because of the coronavirus.

“So the extra demand is something we needed to see. We still have plentiful stocks as far as where the ending stocks estimate is coming into play, but we are showing demand and that’s a very good thing,” he added.

Since some ethanol plants were shut down or idled due to the coronavirus and less travel taking place earlier this year, ethanol demand continues to increase as well lately and that is also supportive to the market.

However, the lack of a consistent weather pattern, in other words, Mother Nature, is causing some concern among growers and the market.

“We keep seeing the 6-10-day forecast or the 8-14-day forecast that keeps calling for above normal temps and below normal precipitation, but we always seem to get a little bit of a rain system ahead of that heat dome that comes into play, so it kind of negates any issue that the heat could cause as far as production is concerned,” he said.

There are a couple of areas that the market is watching that are struggling as far as production is concerned. The far eastern areas of the Corn Belt are seeing little issue with corn right now and are showing concern as crop conditions have been dropping. Even in the western Corn Belt, Iowa for example, actually saw crop condition drop a little bit and those are some of the concerns.

“Of course, in North Dakota I think we’re going to see lower acres,” Martinson said. “What was interesting is that USDA came out with their planted acres report for July and there were still 2 million acres left that were unplanted that were expected to be planted for corn. Some of those acres are likely not going to show up as harvested acres because of how late it was getting and how the year progressed and how wet we got very soon after that. I think there’s still going to be a little bit of a cut as far as production is concerned.”

“However, it’s been demand where we’ve seen the big cuts with the feed demand and ethanol demand. We’ve kind of seen that destruction happen because of coronavirus and the lack of travel, which had stopped the fuel demand needs,” he said.

Martinson said it looks like there is going to be enough production to carry us through with where the demand is at and that’s a little concerning.

“We have not seen any weather issues come in and this corn continues to be rated very well,” he said. “It took a long way to get here, but right now corn is not in a good spot. It looks like corn has run its course and we’re going to see that market be somewhat flat to negative here as we finish out the growing season unless something major comes in in August which could trim yields significantly.

“Right now, it does look like the growing conditions have been good and corn looks like it’s going to have an average or little better than average crop,” he added.

With the current situation in the corn market, Martinson thinks what producers should be looking at is buying puts to protect the downside.

“I don’t want to go in and do future-fixed contracts because of how low we’re at just in case something happens and we do get a little bit of a bounce in this market,” he explained. “I think producers should seriously be looking at putting some liens and puts in for protecting the floor in the corn market, and then leave your upside open and have some opportunity.”

He also noted that basis levels continue to be strong in most rural areas which has been a positive sign.

“It tells us that the end-user still needs to get product and we still need to get things moving,” he said. “That’s the one bright spot. The futures market though continues to see a little bit of a drift and I would be looking at using puts to protect the downside.”

At one local elevator in west central Minnesota regularly followed in this column, as of July 21, the August price for corn was $2.74 and basis was -48 cents under. The October 2020 futures price was listed at $3.31 and basis was -5 cents under.