The corn and soybean markets have had their share of struggles in the past couple years, but while soybeans are seeing a little ray of hope with China entering the soybean market again, at least temporarily, corn has not had that luxury.
“The USDA WASDE report (World Agricultural Supply and Demand Estimate) was kind of disappointing for corn,” said Betsy Jensen, Northland Farm Business Management and a producer/marketer from Stephen, Minn. “All the talk in the soybean market has been ‘China’s coming back, look at this demand that’s coming, isn’t it going to be great,’ but the corn market has had kind of the opposite effect as of late.
“We’re really concerned about ethanol production,” she continued. “Politically there’s been some bad headlines with regards to ethanol and ethanol policy. In September, USDA lowered ethanol use by 25 million bushels, and we don’t know when that ethanol demand is going to come back.”
Jensen pointed out that the recent bombings of oil refineries in Saudi Arabia have certainly highlighted the need for ethanol.
“We want to make sure we have a diverse base of where we get our energy sources. We need to make sure we have a diverse group of energy sources,” she said. “But as of this time there was just another ethanol plant closure announced today, so corn kind of has the opposite affect where we’re a little bit concerned about what demand is going to bring. It’s certainly something unique.”
The recent USDA report also indicated a 1.3 bushel per acre decline in yield, noted Jensen, adding that was a bit confusing to some in the trade.
“There’s still some people scratching their heads wondering how there wasn’t a 10-bushel decline in yield,” she said. “But as of right now USDA is saying 168.2 bushels per acre for yield and that compares to 176.4 last year, so we are looking at substantially lower yields. We’re also going to have area harvested almost the same as last year, so we are seeing ending stocks in corn lower than a year ago, but there really wasn’t anything significant done in the September report.
“The market is looking for ending stocks to go down. That’s what the market would like to see happen,” she added.
Ending stocks are currently estimated at 2.19 billion bushels, which is higher than two years ago when ending stocks totaled 2.14 billion bushels, but it is down substantially – about 250 million – from a year ago.
“The market is debating, ‘Are we going to go under 2 (billion)? Are we going to end up with a 1.9 billion bushel ending stock?’” Jensen asked. “The market is expecting it to come from lower yields and also probably lower harvested acres. But this ethanol factor is hanging over our heads. It’s a warning sign every time you see another ethanol plant close. It’s concerning when we lose demand.”
USDA has, at times, been criticized at times for over or under estimating production, often times at odds with producers, but Jensen said USDA tends to not make large swings in their estimates.
“It’s very rare to see corn yields drop 5 bushels from one month to the next,” she said. “If the corn matures we could still have a decent corn crop this year. The problem is are we going to get to the ending line and when we do, what’s the test weight going to be if the corn gets a frost? So every day we get by without a frost the yield estimate from USDA looks a little bit more likely.”
There’s still a long way to go in this corn market, Jensen noted, adding that the maturity of the crop is in question, and then also yields. The crop was planted late and it pollinated during the hot time of the year making it a very difficult crop to estimate yields and production.
This year’s corn crop is behind in development. There has been a little bit of corn harvested, but that has been in the southern states. Soon USDA will be providing yield estimates for corn.
“We only have 18 percent of the crop that’s mature at this time. That compares to 51 percent last year and 39 percent as an average,” she said. “We are still significantly behind and the weather forecast is still very important. “It’s crazy that it’s September and we are still watching the weather forecast this carefully.”
Corn prices are now back over $3 after being under the mark for quite a while. Basis in corn is still fairly respectable.
“We’re not dependent on the export market like soybean is, a lot of the corn can go domestic,” Jensen said. “It certainly isn’t an exciting price. No one is getting real excited about selling corn at these levels. December corn is at $3.70 and we’d certainly like to see that over $4, or even getting over that $4.60 price that we saw earlier this spring, so we’re still about a dollar off our highs.”
At one local elevator in west central Minnesota regularly followed in this column, corn prices were $3.42 cash and basis was 27 cents under as of Sept. 17. December 2019 corn was $3.34 and basis was 35 cents under. June 2020 prices were $3.54 and basis was 42 cents under.
“The corn market is definitely not enticing anyone to sell, but when it comes to bin space, if you had to choose between corn and soybeans, I would probably bring the corn to the elevator and put the soybeans in the bin.
“Since basis is respectable, you can always re-own with an option if you still want to stay in the market, but the soybean market, to me, is a little bit more attractive to try and store and try and take advantage of some basis improvement,” she added. “For corn, if you don’t have the room for it, you might as well just deliver it at the elevator.”