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Market Commentary for 9/10/21
The USDA report found an additional 246 million bushels to add to the production side of the balance sheets. Plus, the export pace for last year’s crop was not met, which added another 70 million bushels to the bottom line of this upcoming marketing year supply. All of this should have been bearish news; however, the market bounced off the lowest value since April 13th minutes after the report was released.
Technicals:
When the USDA provided bullish corn news in August there was an initial price jump, but ultimately the market closed nearly 20 cents off the highs that day and has worked lower ever since. After bearish news Friday the market closed 20 cents off the lows for the day. From a technical standpoint, December corn closed above the 200-day moving average which was around $5.05. Also, corn traded to the 50% retracement level of the move between last summer’s low to this May’s high before turning around and trading higher. All of this could be suggesting that there may be a price trend shift occurring and corn may be range bound between $5.00 to $5.50 for another month.
Logistics:
Several elevators in the Gulf have begun unloading barges and loading ships with grain for export and most facilities are expected to be running by the end of the month. While there is concern over missing 2 weeks of loading times in the Gulf, US export capacity is at its highest October through December. It is likely our excess export loading capacity (especially in late November, December and early January) can make up for everything missed in early September.
Exports:
The USDA is currently estimating 2.475 billion export bushels, which is similar to 2017 levels of 2.425 billion. This is down significantly from last year’s 2.745 billion bushels due to large Chinese demand. Some are expecting China will not export as much corn as last year, because historically China imports a lot less the year after they surprise the market with large purchases in one marketing year.
Another export concern for the market is the recent droughts in Brazil, which may mean 20% less production than expected (800 million corn bushels). With about 60% of Brazil’s production exported, a lot of that demand could come to the US in late winter or early spring. So, while it would be nice if Chinese exports were like last year, it may not be needed for better prices.
Wheat:
World wheat stocks continue to fall year over year, which suggests less wheat will be used for feed globally. If this occurs, more corn will likely be pushed into feed diets. While world corn stocks are projected to increase half of what was lost last year, it might not be enough to push prices a lot lower. This could even mean corn prices may need to rally to ration demand in the future.
Bottomline:
While I think there is upside price potential in corn long-term, with current prices nearly $1/bu higher than last year at this time, more farmers than usual without on-farm storage may sell their corn across the scale during harvest. This could put downward pressure on prices until after harvest when bin doors get locked. The focus now will be on how fast the Gulf gets back to normal loading and yield reports throughout harvest. While it’s still possible corn could dip below $5 this season, there are a lot of reasons to think we may have turned a corner.
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Jon Scheve
Superior Feed Ingredients, LLC
jon@superiorfeed.com
