Although corn prices are still lingering in that $2.50-$2.60 cash price range, the corn market has tried to move up a little bit as of late with some improved demand.
“We had China come in and make some pretty good purchases of corn last week and that was a little encouraging,” said Randy Martinson, Martinson Ag Risk Management, Fargo, N.D., on May 11. “It looks like we might be turning the corner and starting to see a little bit more demand.”
However, the trouble that comes into play is the May crop production estimate from USDA that indicated corn acres and production “could be a little bit of a stinger to the market.”
Martinson pointed out the trade is looking at very good planting progress with Minnesota and Iowa, by far, leading the charge and getting a great deal of planting accomplished. That, he explained, is putting a little bit of a negative tone to the market along with the expectation that this year’s crop could maybe show a little higher yield potential because of the rapid planting progress. The wet and cold conditions that came over the weekend of May 9-10 slowed things down a little bit as far as planting and there’s a little concern about some possible replanting confronting producers, but nothing major at this point, especially when you look at the majority of the Corn Belt where planting progress has been pretty good.
It’s a little different story in the Northern Plains where things have been moving a little slower and a little bit more methodical because of the wet conditions.
“It does look like the Northern Plains, primarily North Dakota and northern Minnesota, will see a tremendous amount of prevented plant again this year and a lot of that will go to corn, largely because of the late planting and because of the wet conditions and the idea of getting the crop planted in a timely manner,” Martinson said. “A lot of the producers in the north are trying to not look at pushing the envelope on planting this year because I don’t think too many want to be harvesting corn again in March like this last year.
“That could change some of the dynamics of acres in the north,” he said, adding he doesn’t think it’s going to put any real support in the market until July or August when we see what growing conditions are like in the Corn Belt and after USDA releases the final official numbers for how much got planted in the Northern Plains. “But we do have a little bit of demand coming in from China that’s somewhat supportive.”
Anticipating the May 12 report, Martinson said it looks like there will be around 97 million acres planted and slightly less that will be harvested.
“You’re going to look at about 92 million acres harvested, and a crop (production) somewhere around 15 billion bushels (MB) and ending stocks at 3 billion, which is the highest we’ve seen since 1987,” he said. “That’s the black cloud that’s sitting over the top of the corn market.
“But, with the slowdown in ethanol demand, and now because of the coronavirus, we could start to see demand to pick up on the energy side, but our exports still need to see a little bit of a jump there, too,” he added.
Elsewhere, parts of the major corn growing region in South America is experiencing dry conditions, so production could be trimmed a little in that region.
“They are now getting into their critical crop time, the end of their crop stage and it does look like right now, with the dry conditions and with the way the crop has developed, they are going to be looking at a little lower production,” he said. “But it seems like every time we try to get a sale made, Argentina comes in and undercuts us as right now they are dominating the export market, especially to Seoul, Korea.”
Looking at the ethanol side of the corn market, Martinson said things still look pretty dismal, but there are signs of improvement.
“It’s improving a little bit as we start seeing more of the country go back to work and more driving, more travel. That is going to help come in and support or help build the ethanol market back up again,” he said. “But it’s going to take a long time to get this country back up and running. Even though crude oil kind of hit bottom, we’re starting to see it work its way out of its hole and we still have a ways to go before that market is going to get completely rebuilt.
“USDA will give us some idea of what they expect to see as a cut in production for ethanol in the report on May 12, as well, but this is going to be a longer story and not just a short-term one,” he continued. “This is going to be a probably 3-4-5-month issue. Production right now is about 50 percent of what it was a year ago. We have done some demand destruction as far as ethanol is concerned.”
Looking at local cash prices, Martinson said most bids are around $2.50-$2.60 cash.
At one local elevator in west central Minnesota regularly followed in this column, as of May 12, the May cash price for corn was $2.69 and basis was -46 cents under. The October 2020 futures price was listed at $3.32 and basis was -3 cents under.
“It doesn’t pencil very well right now,” Martinson said. “But the market has moved a little and the China (business) is encouraging.”