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Market Commentary for 5/21/21
Corn
Both July and December corn futures closed higher this week compared to the end of last week and are still at or above levels from 3 weeks ago.
Old Crop Corn
The factors impacting old crop corn prices:
- Chinese demand for old crop corn is still uncertain, as many in the trade debate how many bushels will be shipped versus being pushed into next year’s crop.
- As the economy opens and people start driving to work or on vacations, ethanol consumption should increase.
- Beneficial rain throughout the southern US is keeping the grass green and demand for feed stocks at levels that don’t strain the markets.
Old crop carryout is very tight. It seems many ethanol plants have coverage on through the first part of July, but August and early September is less certain. Plus, due to the large market inverse between July and September futures, it’s unlikely commercial elevators are going to be holding grain past July. Therefore, corn futures may see another rally to encourage sales on the remaining bushels owned by farmers or potentially encourage cancellations from exporters.
New Crop Corn
The market is trying to determine how many corn acres were planted this year. The USDA’s March estimate of 91 million acres is expected to be too low. However, one private forecaster’s estimate of 96 million planted acres seems too high.
And if there are additional acres, where will they be planted? Iowa seems unlikely, because farmers affected by the derecho last year won’t want to plant corn on corn due to volunteer corn issues. Fringes of the corn belt may pick up acres, but these aren’t the best corn production areas, so yields there likely will be lower.
Weather is always a wild card. Long-term forecasts show good weather early, but potentially drier weather during pollination. Most years have a weather scare of some kind. The market seems to be trading a few more planted corn acres but with only a little weather risk right now.
Beans
July and November beans are still trading above values compared to three weeks ago.
Old Crop Beans
Most processors pushed hard to get their May, June, and July needs covered the week prior, as seen by the steep break in basis values across the Midwest this past week. Now the question is what will happen with the August and early September time frame because it’s unlikely many processors have covered any of their needs for that time period.
Like corn, the market inverse is keeping commercial elevators from wanting to store beans past July. It also seems likely that most farmers have moved their beans already. So, there could be another upcoming bean rally with late summer demand needing some price rationing. However, Brazil still has a lot of production left to sell so there could be some switching of bushels from US production to Brazilian in the coming months.
New Crop Beans
With so many in the market focused on planted corn acres it seems that beans are being left out of the conversation. Beans need to add a lot more acres, maybe as many as corn needs, to avoid a tight. However, if the consensus is correct and most additional planted acres go to corn, this should keep bean prices strong until the June 30th report is released.
Bean prices seem to have minimal weather risk premium built in.
Bottom Line:
The market is unsure how many acres will be planted for each crop and the estimate range is wide. That means the price potential this year is wide too. Everyone is waiting for the June 30th report, after that, weather takes over as the biggest concern. Then yield will be uncertain until mid-July for corn and mid-August for beans. Additionally, export demand will continue to be a wildcard with most in the trade watching Chinese demand or cancellations. Expect big market swings for the next 60 days.
Want to read more by Jon Scheve? Check out recent articles:
Can Corn Make A Comeback After A 90 Cent Drop?
New Crop Over $6 For Corn And $14 For Beans And We Aren’t Even Trading US Weather Yet
Will Corn Need To Trade Above $8 And Beans Above $18?
It’s A Sellers Market And Buyers Are Feeling The Pinch
Can Corn Get Back To $6 And Will Beans Make It To $15?
Which USDA Reports Should Farmers Give Their Attention To?
Brazil Will Export As Much Corn As The United States With Only Half The Yield Size
Corn Prices Could Range Between $4-$8 While Beans Could Be $10-$16
How Do Trade Cancellations Work And How Do They Affect Farmers?
China May Import 40% More Corn Than In The Last 60 Years Combined
What Price Will Farmers Sell Their Remaining Unpriced Corn?
$6 Corn? $15 Beans? Hang On Tight Its Going To Be A Bumpy Ride
Jon Scheve
Superior Feed Ingredients, LLC
jon@superiorfeed.com
