In mid-April USDA came out with its World Agriculture Supply and Demand Estimates report. The new numbers were pretty much what analysts expected.
“We knew we were going to see a little bit of a decrease in demand, and some thought we could see some production numbers adjusted as well, but that didn’t come into play,” said Randy Martinson, Martinson Ag Risk Management, Fargo, N.D.
“But what we did see is USDA came in and adjusted the three major uses: feed was decreased, ethanol was decreased and so was exports, and rightfully so, other than maybe feed demand,” he continued. “USDA needed to come in and get somewhat closer to what they had for quarterly stocks and these are the numbers they came with.
“The report turned out to be as expected. I mean it was negative to see the 200 million bushel increase, but we expected to see it so it didn’t have a lot of impact on the market,” he added. “But what it did do was it brought the funds in and they were sellers of the market again, and now they’re back holding record short positions in corn.”
The bigger news now is planting progress, or the lack thereof. Up until April 12, the only corn that was getting planted was basically in Kansas and south with very little to nothing being planted north of there. As of April 15, there have been a few scattered reports of bits and pieces of areas where they’ve been able to get into the fields, but the forecast for the next 7-10 days for the western Corn Belt and the Northern Plains called for continued cool and wet weather.
That means farmers will be kept out of the fields for at least another week to 10 days. After that weather system moves through, temperatures will need to warm up to enable farmers to get the fields prepped before planting.
“Right now we’re looking at maybe a May 1 to a May 10 timeframe to be able to get started which is going to put us a little bit late in the eastern and western Corn Belt and the Northern Plains,” he said. “But the market isn’t going to be worried about it until we get to May 1 and then they’ll start paying a little more attention to late planting and concerns of planting.”
The eastern Corn Belt is also wet, but the central part of the Corn Belt is expected to see some planting progress on and off. The report on Monday, April 15, was expected to show planting at about 6 percent, which is equal to the five-year average, but it’s mainly again going to be in the fringe areas of the southern regions, according to Martinson.
“With the acres report and with what we’re looking at, corn likely has seen the biggest acres number we’re going to see,” he said. “Once you put trend line yields with that it’s also likely we’ll see the biggest production estimate for the year in the May crop production estimates when they come out.
“We would expect that once we see those May numbers come in things will get to be a bit better for corn going forward. That’s what we’re hoping, but we do think that we’ll likely see the biggest number in acres in the May report,” he added.
A little over 92 million acres of corn is expected, according to the Planting Intentions Report in March. Whether or not those acres come to fruition depends on the weather, however, at the time the report came out Martinson felt the estimate was accurate and that producers were indeed intending to plant 92 million acres with North Dakota increasing by 900,000.
“But because of the lack of fall prep and the late spring I think some of those intended acres will go to prevent plant instead of actually getting planted,” he said.
Besides potential planting delays, another factor to consider is that producers may start switching to early maturing varieties which will lower yield potential.
On the demand side Martinson noted that exports have been dwindling a little bit.
“USDA did lower exports, which they should have, and we did see lower numbers, which we should have,” he said. “We started the year off in the corn market really aggressively with sales, but they’ve slowed down. South America has been taking a lot of our exports away, so it’s not a surprise to see USDA decrease exports in the last report.”
South Korea has been an extremely aggressive buyer of corn since the February/March timeframe, buying close to 800,000 metric tons which is a huge amount for them.
“They need to keep buying corn. They’re going to the cheapest source,” he said. “Some of it has been coming from us, but the majority has been coming from Argentina. Argentina will soon be sold out of their exportable corn production and that will bring that demand back to the U.S., which is somewhat favorable.”
Martinson said the U.S. is also expecting to see a little more demand coming from China once a trade deal gets done. He added that at this time the enforcement part is done and there’s just some tweaking of some minor things.
“Tariffs are going to be lifted and some will be left in place against certain products, so it does look like right now it’s the final tweaking of the agreement before the two leaders get together to sign it,” he said.
The trade deal with China is not the only matter of trade the U.S. is dealing with and has to be cautious about, according to Martinson.
“We also have to pay close attention to what’s going on with Mexico. If we close the border there, that could hurt some of our demand as Mexico is one of our largest buyers of corn,” he said. “That’s something we have to keep paying attention to as well because that could hurt demand if we continue to push that envelope.”
Local cash corn prices are holding fairly steady at $3.20-$3.30. Basis levels are still holding fairly decent.
“Demand has come up and improved a little in the North, not so much from ethanol but from other sources such as the logistic issues in the southern regions on being able to get corn moved,” he said. “Once the logistics get taken care of, that certainly is going to hurt the basis level.
“Short term, because of the weather we’ve been seeing and with road restrictions, the demand for corn has slowed a little bit, but basis is still remaining fairly good,” he added.
At one local elevator in west central Minnesota regularly followed in this column, as of April 16, the April cash price for corn was $3.23 and basis was 35 cents under. October 2019 cash price was listed at $3.37 and basis was 50 cents under.