Too much of the U.S. corn crop is still out in the field, especially in North Dakota, and that’s a situation producers are continuing to deal with. But, if there’s any kind of silver lining, the basis is strong.
“The corn market still has good basis going, yet too much of the crop is still out in the fields, especially in North Dakota,” said Ed Usset, professor emeritus and grain marketing economist with the University of Minnesota. “It has really become a North Dakota issue because of the late harvest. I feel for those people.”
Usset explained that basis levels are still strong and they got stronger much sooner than they did in the soybean market. He’s hoping, along with every producer, that prices will be a little better next spring.
Cash prices are currently around $3.50-$3.70 per bushel in southwest Minnesota with most in the $3.60 range.
“Do I think we could see somewhat better prices by spring? Yes, but we have to be careful,” Usset said. “Pretty soon we’re going to quit talking about cold weather and delayed harvest and start thinking about next year. We’re going to have more planted acres. It’s going to take time for that to get into the market, but when that chatter starts picking up it will be a bearish pall on the market because we’ll be looking for more acres.”
At one local elevator in west central Minnesota regularly followed in this column, as of Dec. 9, the cash price for corn was $3.38 and basis was -38 cents under. June 2020 price was listed at $3.47 and basis was -39 cents under.
For now, with corn still out in the fields in some regions, and prices not all that great in the mid-$3 range, Usset’s recommendations for producers is to just “sit tight for a bit.”
Prices, he said, could improve, but there is a risk in corn.
“The risk in corn is this strong basis we’ve had and it’s been 2-3-4 months now,” he said. “We’ve had a really nice basis in corn and yet, as we get out into the new year, there is this risk. There’s corn out there and if that corn starts to move, basis could actually go down rather than up, which is odd for the late winter and spring. Usually it’s the other way around.
“I’m looking at today’s prices. You’ve got a basis that’s 20 cents under the July in a lot of areas and that could be 30 under next spring,” he continued. “So there’s a lot of modest risk in that basis, but I like to think that prices will be a bit higher by spring.”
Trade negotiations with China appear to be at another stalemate at this time after President Trump indicated he would consider waiting until after the 2020 election to finalize a deal. The other major trade deal, the U.S.-Mexico-Canada (USMC) trade agreement, is hardly mentioned anymore even though it is a major agreement so important to agriculture.
“It’s been thrown up in the air. We don’t even talk about that anymore,” Usset said. “The President thinks he got his way and renegotiated a new deal and now it’s in the hands of Congress, and now it’s their turn to pick at it and that’s what’s happening. We’re now reading the fine print and everyone is trying to get their two cents worth in on it and it’s stalled.
“There was hope at one time that they might get something figured out by the end of the year, but this is collateral damage in the impeachment proceedings, where it sucks all the energy out of the room and that’s what they want to talk about, so it’s on the back burner,” he continued.
“But this is what happens when you reopen things like this. Something that was so difficult to get passed in the first place – NAFTA was not an easy fight – and now you reopen it and everyone wants to add their two cents. These are big documents and someone wants to look at the third paragraph on page 82, and someone wants to look at the fifth paragraph on page 240 and on and on,” he added.
On the demand side for corn, demand is not robust at this time. “The only positive thing I can say is that exports and ethanol and feed demand don’t seem to be getting any worse, but they’re just not robust,” he said. “It would be helpful to see them turn around and just get firmer, but it’s not there right now.”