Corn

There’s lots of news out there for the various markets, including corn, but the amount of impactful, meaningful news is somewhat lacking.

“We’re hard pressed for news. There’s a lot of news out there, but … we’re stuck in a trading range,” said Ed Usset, professor emeritus and grain marketing economist with the University of Minnesota. “If you look at the prices, just prices alone, we’ve been stuck in a 20-cent range since the end of October, really four months. We’re range bound.”

Usset pointed out that cash prices are stuck in a 20-cent range and new crop opportunities are probably stuck in a little bit narrower range. When Usset talks prices, he’s looking at southern and southwestern Minnesota prices. Cash price of corn in that area is $3.55 to $3.75 a bushel since harvest, and right now, prices are “about smack dab in the middle of that.”

At one local elevator in west central Minnesota regularly followed in this column, as of Feb. 14, the March cash price for corn was $3.41 and basis was -36 cents under. June 2020 price was listed at $3.40 and basis was -45 cents under.

However, Usset thinks, with one caveat, that prices are going to break out of this range in the next couple of months. “I just don’t know which way,” he said. “It doesn’t make sense that we’ll remain so range bound in this narrow territory for so long.

“You can go through the standard bullish and bearish things, the coronavirus, which I will not try to analyze,” he continued. “All I will say about coronavirus is that markets hate uncertainty. That’s bearish. An uncertainty cloud over the market tends to be bearish. We have been kind of on the defensive for a few weeks, so it would be nice to work that out.”

Looking outward, Usset noted that the South American corn crop is doing well. The main corn growing regions there have had pretty cooperative weather and it’s difficult to “kill” a South American crop in the market.

“These are the bearish things now. Are we going to get more corn acres? You bet we are. But then we’ve got the whole weather uncertainty thing,” he said. “People still complain about too much moisture out there. There will probably be some spring flooding. We’re going to build a weather scare into this thing, too. That’s another cloud hanging over the market, only that’s more of a bullish cloud.

“I guess I’d be shocked if two months from now we talked and we’re still in this 20-cent range. But we’ll find out,” he added. “I’m fearful. I hope it breaks out on the upside, but I’m fearful it will break out on the down side. So stayed tuned.”

Usset also pointed out that the recent trade agreements, including Phase One of the U.S./China trade deal, and the USMCA (U.S.-Mexico-Canada Agreement), have not yet had a major impact on the market or market prices.

“I think the market has its fingers crossed and is hoping it comes,” he said. “I told you before, I’m in a Missouri state of mind and I very stubbornly continue to repeat that. Missouri is the ‘show me’ state, and I don’t want to talk about the promises, and I don’t want to talk about the numbers written on a trade agreement. I want to see ships leaving port. That’s what I want to see.”

Usset also noted that the ethanol market seems to be stabilizing, which is good. But it’s not what one would call a robust industry right now.

“It’s not getting any worse, but it seems to be healing up a little bit. That’s good,” he said.

“This whole demand side of the corn market, if we want to dream of an upside breakout, that needs to be a part of that equation,” he added. “We need to show good export demand. China coming in for U.S. corn, not just an occasional shipment, would be a wonderful thing in a big way. And seeing better ethanol demand would all be good signs. We need that if we want to break out on the upside.”

With China facing concerns on several matters, it may be some time before they’ll be getting back into the market to meet the terms in Phase One. So, with prices low and demand slow, Usset said he had few, if any, recommendations for farmers.

“I don’t have a strong sense that I need to sell right now. But I am worried about that downside breakout that might give us concern for a few months,” he said. “We haven’t had the type of rally that asks you to get proactive and get something done. We’re stuck in this narrow range. If we get to the high side of the range, take a look, know your own appetite for risk. I may regret it, but I’m not going to get aggressive trying to sell old or new crop at this point.

“I keep reminding myself and I’ll remind anyone who’s willing to listen, it’s February and it’s early,” he continued. “The game is early and I guess at this point I’m willing to wait for a better opportunity.”

Usset also noted there’s still a lot of corn out in the fields that wasn’t able to get harvested last fall.

“That’s a big problem for North Dakota and parts of Minnesota, though it’s a spottier problem in Minnesota,” he said. “How does that impact the yield and quality? It’s not a positive thing. On the other hand, the market is well aware of it. It’s not an unknown. I think the market has come to terms with it.”