Is $8 Corn Still Possible?
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Market Commentary for 9/30/22
Corn
The USDA Stocks Report surprised the market with less corn in storage than previously estimated. This could lead to a carryout that is the tightest since 2012, and values may need to exceed $8 again to ration demand. However, there are several unknown variables that could affect the market moving forward.
Demand
Demand seems to be weakening and it is still unclear by how much. The exports category is getting the most concern and attention. Currently, exports are expected to be 10% lower than last year and 20% lower than two years ago, when futures exceeded $8. Plus, the market seems to think exports could fall another 10%, which would be a little more than the amount found missing in the September stocks report.
Ukraine
The Russia-Ukraine situation still needs to be monitored closely. With Russia annexing 15% of Ukraine, western countries are applying more sanctions. The market will be watching to see if the current export corridor out of the Black Sea is closed off after November.
Mississippi River Water Levels
There is also concern over significant decreases in the Mississippi River’s water level. New record low levels may be hit, which would lower the amount of corn that can be exported over the next couple of months. This could impact total export pace next year if it continues.
Slowing Global Economy
As the world economy slows down, corn demand everywhere may be impacted. With a US dollar at the strongest level in 20 years, US commodities may have trouble competing on the world stage.
Ethanol
Ethanol grind may be slowing due to decreased gasoline usage from a slowing economy.
Production
The final average US yield is still uncertain and could move in either direction. Focus will then shift to South America as the market looks for any production issues in their next crop from the elevated chances of a third year La Nina.
Bottomline
Corn prices have been impacted by a lot of negative news already. As harvest continues, there may be some additional downside pressure. However, once the bins are filled and doors are locked, it may be difficult to pry corn out of farmers’ hands at current price levels.
Want to read more by Jon Scheve? Check out recent articles:
Should I Be Storing Beans or Corn This Year
The September USDA Report Indicates Upside Price Potential Moving Forward
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If Yields Are As Low As The Pro Farmer Tour Indicates Then $9 Corn Is A Possibility
Corn Basis Is Imploding Around The Country
Jon Scheve
Superior Feed Ingredients, LLC
