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Market Commentary for 5/5/23
With old crop corn bouncing 30 cents off the lows from earlier this week, the following summarizes some market factors contributing to current price movement.
Ukraine Uncertainty
Some of the rally is likely due to the Ukraine grain corridor discussions and whether Russia will be renewing the deal. Russia’s deadline for a decision is May 18th, so debates if it will continue will occur until then, and likely well after that date too regardless of the outcome.
Wheat Production Issues
Another reason for the rally may be severe reductions in hard red winter wheat yields in the southern plains. If Kansas City wheat prices could continue to trade higher the next few weeks, it likely keeping wheat from replacing corn in feed rations.
Recession?
Some financial analysts this past week were suggesting the recent economic data shows a recession may be becoming less likely and a “soft landing” is possible. If so, funds may either stop selling, look to cover some of their short positions, or even go long again. But, with the third bank failure this week, funds may not want to be buyers of anything yet.
Exports
China’s recent corn purchase cancellations have been contributing to price declines as well. If export pace does not stay the course or increase, then it will be very difficult for prices to rally.
Other Reasons Prices Could Rally
- From a technical standpoint corn is oversold and needs to bounce higher.
- While May corn is in delivery, it is gaining on the July contract. This suggests corn should not be delivered and it is worth more than the market is suggesting on futures.
- Basis values throughout the US turned higher this week. This is likely because farmers have no interest in selling at these values. It is unlikely farmers will sell much until after the July 4th weekend, because they are unsure what summer weather conditions will be.
May 12th USDA Report
This will be the first look at demand for next year. Last month’s acreage report combined with trendline yields and using a 3-year average usage would seem to mean a potentially bearish report coming up for the new crop. However, the market may now have this “bearishness” factored in already, and a report that meets expectations could turn out to be bullish instead.
Want to read more by Jon Scheve? Check out recent articles:
Will December Corn Futures Go To $4 Or $8?
Can Corn Rally Back? Plus How to Add 30 Cents to Some Corn Sales
Spreads And Basis Suggest Old Crop Corn Futures Values May Be Too Low
The Market Will Be Focusing On Planting Pace In The Dakotas
If Corn Acres Are Reduced It Does Not Automatically Lead To More Bean Acres
How Important Is Each USDA Report?
Did Old Crop Corn Finally Hit A Floor Price?
Jon Scheve
Superior Feed Ingredients, LLC
