Like soybean producers, corn producers were excited to see Phase One of the trade agreement signed between the U.S. and China, hoping that would give a boost to corn prices. Their excitement was dashed when both markets fell and are now trying to withstand additional pressure from the coronavirus health scare that is having an impact on world markets.
“We are really struggling this year for export sales on corn, unfortunately,” said Betsy Jensen, Northland Farm Business Management and a producer/marketer from Stephen, Minn. “We thought that this China trade deal was going to help. We thought all of these things were going to help us out, but in reality, they just don’t have the animals to feed in Asia anymore. Perhaps we’ve underestimated the impact of the Asian swine virus.
“We’re just really struggling to get rid of corn,” she added.
Jensen and most producers thought – and hoped – that prices would improve after the signing of the U.S/China Phase One trade agreement, but that didn’t happen.
“Unfortunately, what we saw after signing the tariff agreement was ‘buy the rumor and sell the fact,’ definitely for soybeans and also when it came to corn,” she said.
“We have seen the basis adjust a little bit for corn,” she continued. “I will caution guys that there are some good basis offers out there for corn, but most of them require a high quality corn. So if you are having problems with test weight you might want to double check before you sign any basis contracts.”
Local prices, as of Feb. 4, were in the $3.20-$3.25 cash range. Basis is kind of in “a mediocre range.”
“Although there are some good basis offers, they typically come with big discounts, so use caution when it comes to that,” Jensen said. “I really don’t see a whole lot to do in the corn market right now. It’s been pretty bland and I really don’t see any sale opportunities for old crop or new crop corn.”
At one local elevator in west central Minnesota regularly followed in this column, corn prices were $3.43 cash and basis was -36 cents under as of Feb. 3. June 2020 corn was $3.44 and basis was -45 cents under.
Jensen noted that U.S. corn export sales are down 52 percent from last year’s pace and “it’s moving slow.”
“Hopefully things will pick up. We still have time to correct it, but it’s not looking good for corn export sales and we do need to make sure we can export a good chunk of this corn,” she said.
The USMCA (U.S.-Mexico-Canada Agreement) was also supposed to help with corn exports, and it has to some extent. Mexico, one of our largest corn importers, has been somewhat aggressive in buying corn.
“Mexico has always been a big corn buyer, and so we are optimistic now that we have the USMCA that that will help as well,” she said. “We always talk about Asia, but in reality Mexico is a huge buyer. Last week, for example, half of what we exported went to Mexico. So USMCA should, in the long-term, have a good impact on the corn market. But in the near-term, we’re just not getting rid of the bushels like we would like to.”
Jensen also noted that ethanol is not going as well as hoped. She pointed out the USDA numbers in January were all about supply and the final corn production number. She noted too that USDA is going to start looking at demand here in the next couple of months, as well.
“January was really kind of a supply focus and it looked like we had more than enough, but hopefully we can see some demand pick up and we’ll maybe have some bullish numbers come out in the February and March supply and demand reports,” she said.
Looking ahead, Jensen said it’s still a little early to be estimating how much corn might get planted in spring 2020. It does, however, look like soybeans do have a little bit of an advantage because of their lower cost than corn.
“Sometimes things are more about losing less than making more, and so right now it looks like soybeans have an advantage for acres versus corn,” she said. “They’re a little bit better on the price and then also there’s the lower input costs.
“Plus, looking at the condition of how wet things were this fall across a good chunk of the U.S., how early can we get in the fields? So a lot of guys are looking at planting more soybeans,” she added. “Maybe the corn market will have to do some work to get back those acres.”