The start to this year’s corn crop market was a difficult one at best. In fact, many corn producers have “kind of officially just wrote off corn” if they didn’t have it planted as of June 10. But is it the potential disaster that many in the industry are predicting?
“In the corn market everyone is trying to speculate if we’re lying to ourselves or if this is one of the biggest disasters we’ve potentially seen,” said Luke Swenson, president of The Money Farm, West Fargo, N.D.
Swenson was part of a small group that road tripped from Mason City, Iowa, through Illinois, Indiana and Ohio to gauge the progress of this year’s corn crop. What they found was both shocking and surprising.
“My objective was to be less bullish at the end of the trip, and by the time we left we had one guy that bought over half a million bushels of corn before we even got on the plane,” he said. “It’s definitely crazy. I was trying to judge it off of something I’ve seen before, and I just haven’t.”
Part of what they saw was one 16-mile stretch from Fort Wayne, Ind., into Ohio where not a single field had even been touched by a tractor this spring.
“We saw solid stands of winter wheat, but other than that there had not been anything touched. We saw two tractors at the end of that stretch pulling into a field to try,” he said.
Producers have struggled to get this year’s crop planted because of cool, wet weather across much of the Corn Belt. They have dealt with a delayed start to planting and then switching to shorter maturing varieties and sometimes trying to “mud in” their crops, making for a difficult crop progress rating.
“A lot of this stuff probably got planted this week,” Swenson noted on June 10. “But how the heck do you rate a crop that is planted a couple weeks after the insurance date and the ground is super saturated so risks don’t have to go anywhere? Now you get to the point where they might be going to 95-100 degree heat in the next week or so.”
The situation with this year’s corn crop has helped push prices higher. A month ago at one local elevator in west central Minnesota regularly followed in this column, corn prices were just under $3.30 cash and basis was 37 cents under, and December 2019 corn was $3.37 and basis was 48 cents under. At that same elevator as of June 10, June cash price was $3.80 and basis was 35 cents under, and December 2019 corn was $3.87 with basis 47 cents under.
Prices fluctuated across the region.
“We ran corn from $3.65 to $4.55 and from there we set back 20 cents over the last week, which is to be expected given the current situation with this year’s corn crop,” Swenson said. “We basically ran 90 cents without a pull-back. That was the easy money. Now, after this, we have to start to earn some of these rallies.
“The big thing we wrote about a few times and talked about is that between $4 and $5 on corn, nothing happens,” he continued. “At $4 you’re feeding it to cattle and $4.50, you’re just a little more annoyed. You hit $5 then you’ll actually start seeing some rationing, see different things happen. You start to mess with ‘the man,’ you start to see guys import a lot more from Brazil down in to the southeast and places around there. However, at the moment there’s nothing to get the market overly excited about.”
On the demand side, exports of U.S. corn have remained steady. In fact, historically for the year, U.S. corn exports have been doing great with Mexico, according to Swenson, adding that things changed after President Trump proposed a new tariff on Mexican goods if Mexico didn’t do more to control Central American migration.
“The irony is we haven’t seen any sales to Mexico in the last week or so as they’ve been posturing with our tariff deal,” Swenson said. “But now that we’ve been told we have an agreement in place with Mexico, although no one has really seen the details of it. You’d expect that if they’re expecting an issue to pop up and mess with production this year that in the coming weeks they’re probably going to add on to an already record year.”
Recently President Trump tweeted there’s an agreement, and Mexico said they have an agreement, but is that the case?
“The irony is you look at some of these headlines out there and some are saying these are agreements we made a month ago and they’re just now actually trying to enforce them,” he said. “But beyond that, no one has seen anything material. It just seems like uneducated statements you hear which is what drives me nuts.
“Or you hear, ‘Well, Mexico is going to start buying lots of commodities from us.’ Mexico is on a record buying year from us,” he said, “so it just shows a level of ignorance that they’re not understanding what they’ve been doing.
“There’s nothing in writing about what (the two countries) talked about. We haven’t seen an agreement where they’ve signed a sheet of paper that says, ‘We’re going to buy another 500 million bushels of corn from you guys.’ It’s just not there,” he added. “It’s all hyperbole and people trying to speculate and guess over one another. I’m not a fan of markets doing that.”
On the flip side, Swenson noted soybeans were below expectations and the U.S. still has a few hundred million bushels that are sold to China that need to be shipped before year end and people are really uncertain whether they’re actually going to get shipped.
No doubt it’s a trying time for producers, but Swenson pointed out some options.
“We’ve got about 30 percent sold and we’ve still got a chunk of old crop that we’re holding on to,” he said. “But what we’re doing is we’re selling into this market and re-owning with calls. We just don’t want to take any top-side off because this market could be a heck of a firecracker, so we’re going to let that continue to work. We’re going to re-own what we can, for as long as we can, and go from there.”