Although there were no reports of corn export sales due to the government shutdown, the corn market was buoyed by demand that has remained strong and shipments that are continuing to go out.
“Since the government shutdown we haven’t really seen a lot of tremendous news in the market to give us direction,” said Randy Martinson, president of Martinson Ag risk Management in Fargo, N.D. “What we’ve been looking at, as far as corn is concerned, is that corn shipments have remained fairly strong. After we got through the holiday season we started to see them pick up again so at least we’re continuing to see a fairly decent demand picture.
“We’re in our fifth or sixth week of government shutdown and we’re still not seeing export sale reports, but shipments continue to come in better than anticipated and there are rumors of some business that has taken place even though we haven’t gotten confirmation of it,” he added.
During the holiday season Martinson noted there was a pretty dramatic slowdown as far as ethanol production was concerned because of the price of crude dropping so much. However, now that crude has recovered, ethanol production is starting to pick back up again.
“Ethanol production is actually getting back up to levels for corn use that we need to keep the corn demand moving forward, so that’s a positive side,” he said.
Looking at “the big picture,” Martinson pointed to a number of factors that could give corn a positive outlook.
“With demand being strong, ethanol production starting to see a little bit of recovery and the concerns about maybe not all the corn acres getting planted here in the Northern Plains and some of the fringe areas because of how bad the lack of fall prep field work was, we’ve got a little bit of a story to tell as far as corn is concerned,” he said.
At the present time corn is also starting to get planted in Texas in the very southern regions.
That said, the market is also keeping a close watch on what’s happening in the trade discussions between the U.S. and China as they try to resolve the current tariff situation.
Those discussions had a bit of a hiccup on Jan. 22 when the U.S. cancelled some impromptu mid-level talks that were supposed to take place that week.
“That hit the market a little harder as it looks like we’re seeing a little cooling of the attitudes between the two countries,” Martinson said. “But, as far as corn is concerned, it’s looking at other things right now. The demand is staying strong and that’s helping as well as the concerns about production.”
Martinson also pointed out that there has not been any change in South American production. Brazil’s production has already been lowered a little because of the hot, dry conditions but Argentina’s production has not changed as of yet.
“The battle cry is ‘rain makes grain’ and they’re seeing a lot of rain right now during their growing season,” he said.
Although there have been no supply and demand or export sale reports coming from USDA the impact of the government shutdown hasn’t been too bad for corn, according to Martinson, largely because ethanol production and shipments have been increasing and although the market isn’t seeing export sale reports, corn has been able to hold on mainly because it is a domestic market.
“It is down a little bit because of the lack of news for wheat exports and for soybean exports but it’s just some spillover,” he said. “Corn hasn’t seen the main hit like we’ve seen in the other markets.”
As for local cash prices and basis levels, Martinson said basis levels haven’t been all that attractive because after the first of the year farmer selling did pick up a little bit.
“Producers needed to get cash, they needed to invert some calls and get some bins in condition,” he said. “Right now basis isn’t running too bad when you look at the processors. It’s about 40 cents under. But when you get to the elevators we’re looking at 60-70 cents under so basis is a little wider than where it needs to be at for this time of year.”
Cash prices are somewhere between $3.30 and $3.40. There was a little push in the futures recently and that did help push the cash price up to these levels.
At one local elevator in west central Minnesota regularly followed in this column, January cash price was $3.35 and basis was 45 cents under. June 2019 cash price was listed at $3.41 and basis was 55 cents under.
“So the market is very willing to give producers anywhere from that $3.25-$3.50 area for cash corn and that seems to be the trend we’re taking the market in,” he said.
“For old crop I’d be patient. I think basis will improve, especially if we get cold and snowy again,” he continued. “I think we’ll see basis improve as end users are going to come in in order to get product.
“For new crop I still think we’ve got a chance to see that market push a little bit because I don’t think we’re going to see the increase in acres that USDA is anticipating at this point,” he added. “I’m looking at advancing sales for new crop somewhere around that $4.15 area. For old crop, if you can get somewhere up in that $3.50 area it’s not a bad place to be moving corn – if you can get cash to that level.”