The outlook for corn markets is becoming very hard to see. Economists and market analysts can’t agree because too many things are in flux.
Even the local café is closed so it’s not possible to gain insight from even the town know-it-all.
All kidding aside, analysts say there are about three major things to watch – the weather, corn demand and planted acres.
WEATHER
Weather conditions across the US Corn Belt are in their own state of flux currently, but it looks like many analysts feel things are almost normal – too dry here and too wet there; too cold here and too hot there.
Some areas already are complaining about soil temperatures that have not yet risen to optimal levels, and given weather forecasts, it might be reasonable to expect some planting delays, market analysts said.
If planting and germination is too late, it can reduce yields and production. It’s early enough that this isn’t a major market influence yet, but it bears watching because a late planting season can affect prices.
Also, if soil moisture is too dry, it can cut the number of acres that are planted to corn, something that won’t be known for sure for months.
It also looks like some second-crop Brazil corn may need a drink, something that could influence planting decisions in this country.
Monday, the USDA’s National Agricultural Statistics Service reported that US corn planting was about 7% complete, lagging the 10-year average of 9%. However, with some open weather, farmers could get caught up quickly.
And even if the US planted acreage and production is good, the widening spread between Dec20 and Dec21 corn futures may prompt a lot of storage this fall, a market analyst said.
DEMAND
The major demand points for US corn are exports, ethanol and what the USDA calls feed and residual use.
Export demand is rising at present, eclipsing last year’s pace in recent weeks, which may be supporting the basis, an analyst said. However, for the first half of the current marketing year, weekly corn exports were about 32% less than the previous five-year average.
A strong US dollar may limit further growth in US exports, including corn, market analysts said. The greenback rose sharply as world markets took their Covid-19-related lumps, and it remains strong, even though the rate of infection in other countries has peaked.
Some think seasonal increases in US corn exports could return and stimulate export shipments. Something to watch.
Ethanol use and livestock feed go hand-in-hand now. A market analyst said lockdown-mandated travel restrictions have reduced gasoline and ethanol consumption drastically. Some plants may close and never reopen.
That would affect distillers’ grain production, a major feed ingredient for cattle. Without distillers’ grains, nutritionists would have to resort to older ration formulations, which included more corn and soybean meal.
Plus, crude oil is so cheap now that ethanol production cannot be justified economically.
CATTLE, BEEF RECAP
Cash cattle trade Tuesday was reported ranging from $95 to $105 per cwt on a live basis, steady to down $10 from last week. Dressed-basis trade took place at $150 per cwt, steady to down $18.
The USDA choice cutout Tuesday was up $11.47 per cwt at $259.85, while select was up $10.83 at $248.82. The choice/select spread widened to $11.03 from $10.39 with 58 loads of fabricated product sold into the spot market.
There were no deliveries against the Apr futures contract tendered on Tuesday.
The CME Feeder Cattle index for the seven days ended Monday was $119.63 per cwt, up $1.75. This compares with Tuesday’s Apr contract settlement of $117.90, down $0.42.