The corn market, traders and analysts were expecting one thing from the latest USDA supply and demand report. Instead, what they saw came as a bit of a surprise.
“Corn has been interesting,” said Randy Martinson, Martinson Ag Risk Management, Fargo, N.D. “Everybody was expecting to see the USDA report come in and be a little bit friendly, but in true fashion, USDA came in and kind of shot the corn traders in the foot, not cutting production as much as anticipated, and increasing yield, which is a little bit of a surprise. We did see a decrease in the old crop 2018 numbers, which was expected because of the quarterly grain stocks report, but it didn’t quite go as much as most traders had anticipated.
“Corn, because of the strength in the soybean market and because of the potential deal with China, was able to trade to some pretty good levels here again in the overnight session,” he added.
As a result Martinson feels that corn is going to be a little bit longer story, it’s not something that’s going to happen quickly.
“We’re likely going to see decent production for corn,” he said. “I think the bigger thing we’re going to be looking at is USDA is going to slowly continue to cut acres because of the cover crops that came into play when guys put corn in because they could chop it for silage or do something with the prevented plant acres.
“I do think our harvested acres are going to continue to see a decrease for corn,” he continued. “I wouldn’t be surprised to see yield drop as well going forward because I don’t think we’re going to have as good a crop as they expect.”
Martinson feels that the corn crop that’s still out in the field looks like it’s a good crop, but with how wet it is, and once lower test weights due to frost are factored in, he thinks production estimates will likely come down throughout the fall.
“We’re likely not going to see that final number until we get to the January time frame and I think that is when acres will probably see the biggest drop, which will be supportive to corn,” he said.
The other story that’s out there for corn, and which Martinson feels is probably even a bigger one, is the delayed planting that is taking place in Brazil in South America. Two major growing regions are seeing very slow planting progress because of very dry conditions.
Many people feel that’s a soybean issue, but Martinson thinks it’s more of a corn issue.
“They’ll get the soybeans planted, although they’re going to yield a little bit less because they’re going to get planted a little later, so it’s likely they’re going to see lower production on the soybean side,” he said. “But it’s going to push back the planting date for corn, and it’s going to lower the maturity days for corn, if they even go in and plant corn. They might look at trying something else because of how late it’s getting, which will cause a decrease in the corn production (region of South America), which should help bring some export demand back into the U.S.
“I think that’s the bigger story for corn and that’s something we won’t know until we get into that March timeframe,” he added.
One other factor in the market is that corn feed demand has seen a little bit of an increase, which was included in the latest USDA report.
“We can’t have a growing cattle herd, a hog herd and a poultry herd and see corn feed demand decline like we have, so we finally made a ‘true-up’ in that,” he said. “That’s a number that we’ll see at least stabilize or increase moving forward because of the numbers of livestock out there.
“If we have another bad winter, and it looks like we’re off to a good start to not such a good winter, I think that could also help increase the feed demand as we go forward,” he added. “Overall, I’m friendly corn, but I think the corn story is going to come slowly and methodically throughout the fall and early winter.”
Finally, the early season winter snow storm that raged across the region on Oct. 10-12 is likely to impact corn production, but it is still too early to tell how much it may impact the corn crop.
“When you look at the tri-state region, the main states that were affected, that takes in 17-18 percent of the corn production, so it’s roughly 2.3 billion bushels that’s affected by that,” Martinson said. “We might see a 10 percent issue in the corn crop because of it. That could be 235 million bushels that might be vulnerable to having some issues. That is possible.
“We need to get a little further in to see how much of the crop can get harvested,” he continued. “The quality is going to be an issue for corn going forward just like what we’re seeing in the other crops because of how wet it is.”
There has also been talk of producers who are considering leaving their corn in the field until spring to harvest, just because of how wet the corn is and how wet the fields are. Hopefully the moisture of the corn will go down and the value will go up.
“I think that’s an issue we’re going to see playing out here going forward. All the corn might not get harvested in the Northern Plains this year as producers wait for it to dry down in the field,” he said.
At one local elevator in west central Minnesota regularly followed in this column, as of Oct. 15, the November cash price for corn was $3.63 and basis was 30 cents under. April 2020 cash price was listed at $3.72 and basis was 37 cents under.