Corn

During the middle of January, the United States approved the U.S.-Mexico-Canada trade agreement (USMCA), which has renewed U.S. producers’ hopes that this will bring increased demand from two of our major buyers. The U.S. also signed phase one of a trade agreement with China and the hope is that will also create more opportunities for demand which has been lackluster at times during the year.

 

“So far our corn export pace has been a bit slow. It’s been kind of disappointing. It’s steady, but a bit disappointing,” said Frayne Olson, grain marketing economist at North Dakota State University. “The numbers aren’t quite as big as we were hoping.”

 

But Olson sees some hope with the recently signed trade agreements.

 

“I think there are some folks in the corn market that are looking toward not only the USMCA, but also the U.S/China agreement to try and look for some hints that China may come back in the market and buy some U.S. corn,” he said. “My opinion is, I think they will come back in, but it may take a little bit longer to work out some of the details.”

 

Olson explained that with phase one of the U.S./China agreement, there’s a two-week waiting period after the actual signing ceremony before the agreement actually takes effect. Realistically, he pointed out, the first part of February is the timeframe the U.S. will probably start to see some Chinese interest.

 

“There were some rumors of China buying some corn late last week,” he said on Jan. 20. “Because of the holiday season delay we won’t know from USDA’s reporting system until this week whether that was confirmed China or not.

 

“I think the markets are going to be looking for someone, hopefully China, to come in and start buying some corn to help bolster some of the export pace,” he continued. “So far it’s been a little bit slow.”

Another thing that people will be looking for is if China comes in and buys some U.S. ethanol.

 

However, in Olson’s opinion he doesn’t really expect that will take place for a little while yet.

 

“The corn market is kind of in drifting mode right now. The ethanol industry is doing okay, better than we were this past summer, but margins are still pretty thin and demand base is looking for quality grain,” he said. “The biggest uncertainty we have is yields and locally what’s going to happen with all those unharvested acres come spring.”

 

At a recent meeting of the North Dakota Grain Dealers Association, Olson said there was much concern among attendees regarding what spring of 2020 holds in store for producers. There is still a good amount of corn left standing out in the field, more so in North Dakota than surrounding states, and there are still memories of last season when wet, cool conditions made planting difficult. There are concerns about the unharvested acres, prevented plant policies for 2020 and potential acreage for this year, as well as what Mother Nature holds in store.

 

From a marketing strategy standpoint, because the full impact of this trade agreement has not been factored into the markets quite yet, what Olson is suggesting is that for old crop corn he’d be somewhat cautious.

 

“Obviously, if you see some pricing opportunities don’t be scared to take advantage of those, but I’d be a little bit cautious on pricing 2020 corn,” he said. “I think there’d be some better opportunities close to spring work and there gets to be more uncertainty about planted acreage and prevented plant and how many acres of corn will actually get seeded.

 

“And it’s not just in North Dakota,” he added. “South Dakota has some issues; Minnesota has a few issues, and Michigan and Wisconsin also have a few issues when it comes to planted acreage and unharvested crop already.”

 

Looking at local prices, at one local elevator in west central Minnesota regularly followed in this column, as of Jan. 17, the February cash price for corn was $3.49 and basis was -40 cents under. June 2020 cash price was listed at $3.56 and basis was -45 cents under.