The corn market has been in a narrow trading range of late and it’s looking like it could remain there for a while yet.
“We’ve been in a pretty tight trading range for corn over the last few months, and the market has been somewhat comfortable to trade in that range,” said Randy Martinson, Martinson Ag Risk Management, Fargo, N.D. “The market has been looking for some direction, looking for something to break it out of that 10-20 cent range that we’ve been in. And it finally did here, but the trouble is it broke to the down-side off of fears of the coronavirus, and a little bit of concern about exports for U.S. corn because of quality concerns.”
At one local elevator in west central Minnesota regularly followed in this column, as of March 2, the March cash price for corn was $3.36 and basis was -35 cents under. October 2020 cash price was listed at $3.28 and basis was -50 cents under.
“A lot of foreign countries, especially some in Asia, are coming in and bidding for corn, but they’re excluding the Pacific Northwest for bids because of the rumors of the lower test weight for our corn up in this region,” he said. “That, I think, is kind of hurting our corn market a little bit.”
Also, most of South America is seeing a little bit better weather lately, however, there is a little concern yet with wet conditions in Brazil and that has slowed the harvest for soybeans, which were a little slow for planting the second crop for corn. The later that corn crop gets planted, the closer it gets to critical crop development stages when the heat is rising, so it’s possible that production estimates for South American corn could be reduced.
Argentina, too, has been seeing some “back and forth weather,” and is looking at 10 days of dry and warm conditions to start the month of March, which will likely pull down the potential of the corn yield.
At this time it looks like the market is going to be looking at an average crop in Argentina and a little bit lower than last year’s crop for Brazil, at least for the way current estimates are coming in.
“But, we’re not seeing a lot of demand on the export side because of the concerns about the U.S. corn,” Martinson said. “We’re the cheapest in the world, so if somebody wants to buy corn we’re definitely going to be the one they should be coming to because of our lower price. But quality is coming in to play on that.”
Martinson did note the U.S. has seen some good business coming out of South Korea and Mexico, who have come to the market fairly strong.
He also pointed out the weather is improving enough where there is starting to be some harvest activity on the 2019 crop in the Northern Plains.
“So the corn is starting to come off and that’s feeding some of the demand for local ethanol plants and some feed yards,” he said. “The local demand is being met by the bushels that are coming off the fields right now. But until we can get a little bit further into the potential of our production or planting season, I think corn is going to be somewhat stagnant.
“USDA didn’t help us with their Ag Outlook Forum for increasing acres for corn, and that’s followed up by Farm Journal actually looking at more acres, so the potential for an increase in acres and bigger stocks has added to the little bit of demand concern that’s keeping corn at bay,” he continued. “We’re going to have to get into our growing season or see some sort of an issue, then we’ll likely see corn have a chance to see some kind of a rally. But as of now, it’s just being somewhat kind of stagnant because of coronavirus fears and slow demand.”
Martinson feels China is going to eventually come in and buy corn because they’ve been pulling corn out of their reserves and they’ve made the decision not to go with their 10-15 percent mandate on ethanol because of tight supplies of corn.
“So they will have to bring corn in to meet demand, but because of the coronavirus and the slowdown in consumption, I think it might be pushed back a little bit,” he said. “It’s not like the demand is not going to be there. It’s just that we’re pushing it back to possibly more into a July timeframe than we are a March or May timeframe.”
Once producers get into the thick of the planting season, which should be April-May, Martinson said he’s looking for a little more movement in corn prices.
“I don’t think we’ll see those acres planted. It depends on how well the harvest goes up in the northern states that have product left and whether or not we can get these fields worked back,” he said. “I think that’s going to be a direct relationship on just what can happen as far as corn acres for the 2020 year.”
Martinson also thinks it’s going to be dependent on just how bad river flooding is going to be to the south as producers are still going to need to be able to bring fertilizer and inputs up the river.
“If the flooding is bad, that’s going to slow that down and I think that could impact the number of corn acres for 2020 as well,” he said, adding that the threat of potential flooding is “moderate” at this time, although there are a lot of levees that haven’t been fixed, making it easier to see more flooding in some areas.
“It’s going to be tougher to bring some of that product up river,” he concluded.