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Market Commentary for 3/3/23
Corn Exports
Rumors of corn exports to China had the market on edge at the end of the week, with futures finishing almost 18 cents off the lows from a few days earlier. With the March contract, which is in the delivery process, trading higher than the May contract, along with basis increases throughout the US, some are expecting export announcements in the next few weeks.
The US is about the only exporter of corn right now and we are competitively priced with the rest of the world, so export numbers should increase. Brazil export facilities have switched over almost completely to beans, as their new crop is being harvested right now. Argentina’s corn crop will likely be 20-30% lower than normal due to the worst drought in 50 years. And, Ukraine continues to have logistical issues due to the war.
So, even though the corn export pace is currently behind USDA estimates, there are still some variables that would make it possible to hit their projections. Five years ago, we were similarly behind at this point in the year, but after several months export pace caught up to the estimates previously set by the USDA that year.
Wheat Production Decreases
This week the United Nations released an estimate showing the global wheat output could be 1% lower than last year. This is the first time in 5 years that worldwide wheat production is estimated to be down year over year. The continued fighting in Ukraine is contributing to the decrease along with several major wheat producing areas that are expected to have some production issues after several years of record yields. Since wheat is always a potential feed substitute to corn, this could be supportive of prices long term.
Looking Forward
By the end of March, most farmers will go into a “selling hibernation” for nearly 90 days as they focus on planting, spraying, and observing early summer weather. Many farmers have already sold a lot of their old crop stocks, so this recent futures price drop probably does not incentivize farmers to sell any time soon.
The futures spread over the past couple of months incentivized commercial elevators to have all the grain they own sold by now. That means if export pace improves over the next month, US buyers may be scrambling to find grain. With elevators out of stocks and farmers busy in fields, the remaining grain could be held in very tight hands. This could mean a potential basis increase and/or futures rally over the next few months.
Want to read more by Jon Scheve? Check out recent articles:
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Jon Scheve
Superior Feed Ingredients, LLC
