Corn

USDA released its Prospective Planting report on March 31, which would be the most corn acreage planted in the U.S. since 2012, if realized.

USDA expects farmers to plant 97 million acres to corn, which is above the range of pre-report expectations. That said, many in the industry feel the estimate may be too high.

“We did have planted acreage come out today. Turns out we are going to plant the most corn ever since 2012,” said Betsy Jensen, Northland Farm Business Management and a producer/marketer from Stephen, Minn. “I think the number is so insanely high that everyone is looking at it going ‘there’s no way.’ I think there’s a lot of dismissal of the corn number because it was so high. I mean almost 97 million acres, that’s just under what we did in 2012. I do think there’s a lot of skepticism about the size of that number. It’s so far above even what private analysts were thinking.”

Planted acreage is expected to be higher than last year in 38 of the 48 reporting states. USDA surveyed farmers in the first two weeks of March, during which Saudi Arabia and Russia’s oil dispute shook global markets, including ethanol.

Most private firms were forecasting as much as a 10 million acre increase in corn plantings with spring wheat acres increasing slightly from last year.

“There was one private analyst who said 96 million acres, but on average they were thinking a little over 94 million. It came out just under 97 million,” Jensen said. “So it was substantially higher than what anyone had anticipated. Who knows? We still have a long time.

“The market has to sort all of this out now,” she continued. “Keep in mind a lot of this survey was done weeks earlier. Things have changed dramatically since the survey happened. We’ve had ethanol plants shutting down. This number should have been limit down. If the market believed this, it should have been limit down and it wasn’t. So I do think there’s a lot of skepticism about the size of those corn acres.”

As stated above, the Saudi Arabia and Russia oil dispute has caused a huge disruption in the ethanol industry, which is causing big concerns for the corn market in general as there’s just no market for ethanol at this time, Jensen noted.

“There are no margins to be made,” she said. “In the Northern Plains we don’t have that many ethanol plants and so we don’t see the impacts of it. The futures market hasn’t reacted quite as much, but if you happen to be near an ethanol plant, your basis has disappeared.

“Before you were looking at maybe a zero basis around an ethanol plant, or even a positive basis, but now those have gone negative and so you’ve probably lost 50-60 cents on your basis and then you’ve probably lost about 10-20 cents on the futures market, as well,” she explained. “So the ethanol has just really killed the corn market at this time.”

Corn prices were not that good prior to the report and they haven’t improved since, Jensen noted. To Jensen, she said it’s pretty rare that prices are not able to get over $4-$4.25 corn for new crop. The last time new crop prices were in the $4 range was back in January.

“We typically see (new crop) going up to $4.25 and that’s kind of my rule of thumb to start selling corn and be kind of aggressive – $4.25 is where you can start selling corn,” she said. “December futures today are about $3.60, so we’ve got a long ways to go for the corn market.”

At one local elevator in west central Minnesota regularly followed in this column, corn prices were $2.85 cash and basis was -55 cents under as of March 31. October 2020 corn was $3.01 and basis was -55 cents under.

“Corn has just been a steady decline since January,” she said. “The oil battles between Russia and Saudi Arabia are certainly a very big struggle right now for the corn market. Demand is just really sluggish. We would like to see a little bit more corn demand out there.

“I can’t see making any sales at this time. I will say that without the ethanol market, if we do not get higher oil prices, this is going to be quite bearish for corn,” she added. “It’s great news for us that need to buy fuel, but we do need higher oil prices to keep up ethanol margins.”

The recent trade deals with China, as well as Canada and Mexico, has “not really produced any more demand.”

“We were expecting a big decline in export sales. We already knew that that was going to happen and that is what’s happening,” she said.

USDA also released its grain stocks report on March 31. The report showed that disappearance was “pretty good” and that the U.S. is actually getting rid of a lot of corn.

“A lot of that might have to do with low quality corn. If you’re going to feed corn and you’re feeding low quality corn, it’s going to take more bushels,” Jensen explained. “We’re probably going to see feed use go up mostly because we have to have more bushels to reach the same quality.”

Corn stocks were listed at just under 8 billion bushels as of March 1. That’s down 8 percent from a year ago. The stocks number didn’t come as a total surprise.

“Corn stocks are down from where they were a year ago, but looking forward, it does not look like there’s a lot of bullishness right now,” she said. “It’s actually a pretty bearish market at this time.”

Looking ahead, USDA will start crop progress reports this month, so the market is going to start watching spring planting conditions. For many parts of the region, conditions last fall were wet and there is still corn standing in the fields. Jensen estimates that planting is still three weeks or so away before producers begin planting.

In the meantime, Jensen urged farmers to look for any opportunity to make corn sales.

“If you get a sale opportunity, you had better take advantage of it,” she said. “There still is a carry in the market. Our December futures are higher than our May futures, so there is an incentive to forward contract. Keep that in mind.

“You may not like the price, but you might want to hedge yourself a little bit and get something sold this spring, even if it’s not the price you were hoping for,” she added. “It’s very difficult to find anything very bullish for corn right now.”