Corn has been an interesting market to say the least. Last year at this time the market was hitting contract highs and this year it is as well, but for a different set of circumstances.
“In the last two weeks we’ve put in higher closes. They’ve virtually erased all of the pressure that we’ve seen since last year at this time,” said Randy Martinson, of Martinson Ag Risk Management, Fargo, N.D.
“Last year we were hitting our contract highs and the market slipped off after we started to see the tariffs come into play and we actually had decent planting progress,” he continued. “We’re seeing just exactly the opposite here this year and the market, for the last two weeks, has been able to rally.”
This year the start of planting was delayed and farmers haven’t been able to make sustained progress as cool, wet conditions have prevailed over much of the region. As a result, prices have moved up as it appears there will be fewer corn acres planted than estimated in the March planting intentions report.
“On Tuesday (May 29), we’ve pushed corn to new contract highs, breaking the high we had set last year and it looks like we could be on track to try to beat the last three-year high of getting close to that $4.50 area,” Martinson said. “A lot of it is coming down to just the concern about where planting is going to fall into play.”
The Northern Plains, the western Corn Belt and the central and eastern Corn Belt have seen extremely slow planting progress. As of the last USDA report in late May, corn was at 49 percent planted.
“The trade is hoping to see this get close to 65 percent. If we fall short of 65 percent planted with virtually only one week left to go for a lot of areas regarding the final planting date for crop insurance, and two weeks for most of Illinois, Indiana and Ohio, a lot of producers are leaning toward some pretty big potential prevented plant numbers for corn,” he said.
“I’m not in that camp of thinking it will be double digit numbers, but I think we could easily see 6 million acres be pulled down as far as corn is concerned and go into prevented plant,” he continued. “But on top of that, a lot of guys are talking that because of how late the crop is being planted and how poor the conditions are, you have to pull it off of trend line yields. Even if you take a 5 percent yield off, you’re bringing close to 9 bushels per acre down off of potential yield. You’ve got stocks getting cut down close to that 1.1- to 1.5-billion bushel mark – basically taking a billion bushels off our ending stocks estimate which has really helped to push this corn market and caused some pretty good strength.”
The previous contract high for December 2019 corn was $4.23, but on May 28 it traded up to $4.30 – a new contract high.
“If we see lower planting progress, below that 65 percent planted, then I think that this market has a chance to try to test that $4.50 level,” he said.
At one local elevator in west central Minnesota regularly followed in this column, as of May 29, the cash price for corn was $3.64 and basis was 50 cents under. December 2019 price was listed at $3.81 and basis was 48 cents under.
There hasn’t been as much discussion about doing much as far as the demand side as there are no changes as far as that is concerned.
“This is just off of production and that’s where it looks like where a lot of things are starting to see some from friendly news,” he said.
As of this time the big thing that everybody is going to be paying attention to is planting progress and weather. The long-term weather forecasts are starting to show a little improvement and there’s starting to be a little bit of heat enter into the 6-10 day forecast, although that won’t be for all regions. But Martinson feels that if it starts to heat up and things can dry out some, that certainly is going to help farmers get back in the field to get the last few acres planted and also help this crop get growing to see what kind of stage it’s going to be at for potential production.
“Right now everybody is staring at corn. Planting progress is the big thing and the potential of where prevented plant is going to come in to play,” he said.
Demand for corn is still staying decent, according to Martinson. Sales are “not setting the world on fire,” and there has been a little bit of a pull back as far as ethanol is concerned because of the slow-down in ethanol. There has also been a little bit of a pull back in feed demand.
“Our exports have been okay and we’re going to make USDA’s pace as far as exports are concerned,” Martinson said. “The trouble will be next year if we see prices drifting up and stay high like this we will do some demand destruction. We will lose some of that demand that we’ve been hoping to get.”
The other problem, he noted, is that wheat is going to become a competitor with corn in the feedlot ration because of quality issues that are potentially going to come into play in the winter wheat region and that’s going to bring some competition to the feed ration for corn.
“Right now for old crop corn we’re looking at an export pace of 2.3 billion bushels and as of this time we’ve shipped only about 64 percent so we’re behind in shipments. But the nice thing is we still have a little bit of time as we’re about two-thirds of the way through the marketing year for corn,” he said.
As far as corn exports, sales are at 81 percent of expectations which is close to being in line with USDA, so at this point it looks like the U.S. will make expectations as far as exports are concerned.
The ongoing trade dispute with China really hasn’t come in and affected the corn or wheat market that much as neither one is dependent on China for exports.
“There was some residual pressure because of soybeans going down,” Martinson noted, “but for the most part now that China and the U.S. are at a stalemate, we’re not going to see much progress. It hasn’t come into effect what’s going on in corn as of late.
“Going forward the big thing is that weather is going to be the driver at this point and just how many acres can get planted,” he concluded.