Corn beans truck barge

Uncertainty is haunting the grain markets as COVID-19 continues to impact the world economy. Nobody knows when the economy will reopen or what it will look like when it does.

“The market does not like uncertainty,” says Don Roose, president of U.S. Commodities in West Des Moines.

There are some things the market does know, but most of them are not good. The first is that people are driving much less and the demand for fuel has nose-dived. Pollution levels have fallen, and it is good for drivers who are seeing very low fuel prices. But it is bad for the oil and ethanol markets. And since about 39% of the corn grown in the United States goes through an ethanol plant (though some comes back out as animal feed) it means downward pressure on the corn market.

“We only need about 50% of the ethanol plants open right now (to meet the fuel demand),” Roose says.

The second item is that while snow and cold hit the Midwest last week, there is no serious drought or flood issue so far. That means any weather risk premium is disappearing from the market.

“It’s a one-two punch,” Roose says.

If there is a bright spot, it may be that U.S. corn prices are so low that the United States is the low-cost market option in the world of exports so export figures are climbing.

For farmers, there are many questions. For example, will they shift more acres from corn to soybeans at this late date? Will the government aid for farmers be enough to make any notable difference? And what options are available for farmers who are looking at prices that are below the cost of production?

For now, Roose says there is little incentive to market much new-crop corn because the price is below the cost of production. The crop insurance program will likely be very important this year. And farmers will need to keep an eye on the basis levels.

Gene Lucht is public affairs editor for Iowa Farmer Today, Missouri Farmer Today and Illinois Farmer Today.