It’s not complicated. “Weather is driving everything,” says Karl Setzer, a market analyst with AgriVisor.
Harvest is getting closer in the United States. The Eastern Corn Belt has been wet, and the crop outlook there is good. The western Corn Belt has been dry, and the crop doesn’t look as good. Drought has gripped the Plains and has been an issue overseas in China and Europe.
“Weather has turned into a perpetual factor in the market,” Setzer says.
Of course, the size of this year’s crop isn’t the only factor in the market. Setzer says stocks-to-use levels are about 9% for corn and 5% for soybeans, meaning the supply is tight. That likely won’t end with this year’s crop, meaning prices could remain relatively high for the coming year. But there are complications to consider.
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One of those complications is that lower production from the United States or China or Europe means a bigger incentive for South American producers to plant more acres. This year South America produced about 115 million metric tons of corn. That was a record. But next year it is projected to harvest $125 million metric tons.
Short supplies here tend to push prices up, but they can also incentivize South American farmers to expand production.
In the shorter term, Setzer says the market went up in part last week due to news of drought in China. But it appears the worst of the drought area is not in the corn-growing region of the country, so prices have reacted.
And what type of buyer China will be this coming year is another question. Relations between China and the United States aren’t especially good right now and while the trade war of the Trump years has subsided, Setzer reminds farmers that the Phase I deal has also expired.
With all of that in mind, it is still clear that the immediate attention will be on the U.S. harvest.