Did Old Crop Corn Finally Hit A Floor Price?
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Market Commentary for 3/18/23
May corn finished the week up 17 cents, largely due to China providing export announcements four days in a row. Each day with an export announcement, old crop corn futures also increased. There has not been a four-day rally on the May contract since early January.
Also last week, it was announced that the funds have been liquidating a significant amount of their long positions since late February. It now seems end users and likely China were buying old crop corn during the pullback.
If the funds move to a holding pattern while farmers are planting, a floor price might have been established. And if more exports are announced in the next few weeks, higher prices are a possibility.
Ukraine Uncertainty Continues
Currently, it is unclear how many days the Ukraine grain corridor will be extended. Ukraine said it was renewed for the normal 4 months, while the Russians have said it was only for 2 months. Fewer days makes it more difficult logistically for buyers to line up freight in and out of the region. Either way, the continued uncertainty in Ukraine will not likely go away anytime soon.
South American Weather
The Mato Grosso region in Brazil has had significant rainfall recently, and some are concerned there could be nitrogen loss in the soil which may lead to yield reductions longer term. Conversely, Argentina continues to miss out on rainfall, and the dry weather may reduce yields even further.
Wheat Weather Impact
Continued dry weather in the US southern plains may help Kansas City wheat futures prices and minimize it being used as a corn replacement in feed rations this spring.
African Swine Fever (ASF)
There were reports this week that the disease is present again in China. Some market participants are suggesting it has only affected about 10% of herds and is not a big concern right now. It seems that every winter the disease returns, but producers are getting better at handling outbreaks. This issue will continue to be monitored closely by the markets moving forward.
Banking Concerns
All the banking issues in the news this week has spooked the financial markets. To combat this, the Fed and their European counterparts seem determined to keep the faith in the banking systems strong by moving quickly to keep depositors at these shaky institutions whole. Long term this should be positive for the financial markets, and in turn corn prices.
Moving Forward
As the trade awaits the acreage and old crop stocks report on March 31st, the focus before the report will be on export announcements out of the US.
Want to read more by Jon Scheve? Check out recent articles:
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How Will The Market React When Farmers Start Focusing On 2023 Planting?
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War And Weather Are Driving Market Prices
Jon Scheve
Superior Feed Ingredients, LLC
