With much of the Midwest and Northern Plains facing cooler, wet conditions, the corn market is keeping a close watch on spring planting progress, as well as the weather.
“The world of corn is watching the weather maps right now. It’s still early to be talking about planting delays, but most of the Midwest is pretty wet this week so that does have some traders a little bit nervous,” said Betsy Jensen, Northland Farm Business Management and a producer/marketer from Stephen, Minn, on April 29.
“I know farmers don’t always like rain in the spring, but traders love moisture,” she continued. “In the long run it pays off, but right now we don’t have much for a crop scare in the corn market.
Farmers might be nervous, but the trade is still pretty relaxed about our ability to get the corn planted in a timely fashion.”
The cooler, wet conditions in some regions has caused slower planting progress. If it continues it could be bullish for corn as farmers may switch to other crops. Already some farmers are switching to earlier maturing varieties. So far there hasn’t been a big switch to another crop, however.
Besides the weather and planting progress, the market is also watching South America where harvest is about 25 percent complete. That corn is going to be coming on to the market shortly, but the good news is South America doesn’t do that much in exports, according to Jensen.
“Harvest is moving along in South America, but we’re still seeing both good export demand and domestic demand” here in the U.S., she said.
That said, Brazil is probably going to have a record crop and that’s one of the reasons in its April report USDA showed an increase in ending stocks.
“USDA cut demand a little bit because we do see Brazil coming into play,” she said. “South America is pretty much on track to have a little bit above average crop, but they’ve looked good for quite a while. It’s Brazil that everyone is surprised about the size of its crop.”
Another factor that is on the minds of farmers and the market overall is the ongoing trade negotiations and where those stand.
“My concern with farmers is that we are focusing on China, but we have a lot of balls in the air right now,” Jensen said. “We’re working with Japan on trade agreements as well, and we can’t forget Canada and Mexico. So China is making the headlines, but in reality we really need to get some firm things under way with regards to the new NAFTA, the USMC (U.S./Mexico/Canada trade agreement), and so there’s still a lot of balls in the air when it comes to trade for corn.
“I know farmers want to focus on China, but we have to make sure we are watching the other ones as well,” she continued. “For example, South Korea just bought corn last week and so we do sell to more places other than just China, but that’s the one that tends to make the most headlines.”
While there is still fairly good domestic demand for corn Jensen said there isn’t a lot of incentive to sell corn at this time as cash prices are still just over $3.
“There aren’t a lot of incentives to be making sales, so keep your eyes on the 2019 December futures and watch for an opportunity to get something sold closer to $4,” she said.
“One thing I will recommend on corn is that farmers look at their local elevators as there still is good demand for corn,” she continued. “I know we tend to watch the futures market, and we watch the futures market go down, but the basis offers that we’re seeing are pretty respectable, so I just want to advise farmers to go ahead and take a look at their local basis offers and see if there’s something there that looks attractive to them.”
In northern Minnesota, where Jensen farms, basis levels are 40-50 cents under, which is phenomenal and not something they get very often.
At one local elevator in west central Minnesota regularly followed in this column, as of April 30, the April cash price for corn was $3.21 and basis was $.37 under. December 2019 price was listed at $3.30 and basis was 48 cents under.
A lot of the demand is coming from the domestic side, Jensen pointed out, noting that there’s still good feed demand and good local demand. Exports, she added, have been “okay, but nothing to brag about.”
So although there still is good demand for corn, the problem is there just happens to be a little too much of it on hand at the moment.