The corn market is in the midst of a bull run. Most significant, market prices are defying normal patterns: that is, the market usually works from spring/summer highs into negative territory as we go into harvest. That regular trend is largely supply-driven; producers begin to actively market corn to make space for the new crop – thereby driving prices lower around harvest.
However, as explained last week, USDA - and private analysts - have systematically lowered total production prospects for this year’s crop. USDA’s projected carryover for the coming crop year was initially projected around 3.2 billion bushels, based on 97 million planted acres. The most recent WASDE report released October 9 pegged carryout at around 2.2 billion bushels, based on 91 million planted acres.
As a result, projected carryover has been reduced from around 22.5% of total use, projected to be 14.8 billion bushels in May, to just under 15% in October with total use being reduced to 14.6 billion bushels.
And as a result, the corn market has staged a significant rally. The December corn contracted bottomed at $3.20 per bushel in early August; we’re better than mid-way through October and the contract has now managed to close above the $4 mark.
But even more important, cash prices have been followed suit. This week’s graph highlights weekly cash prices (Omaha and Texas Triangle) since 2015; the graph highlights normal seasonal pressure in contrast to 2020’s action to the upside.
Meanwhile, USDA’s Sept. 30 Grain Stocks report was even further supportive from an indirect perspective. That is, on-farm corn storage was below last year’s level; while the difference isn’t huge (around 63 million acres), it’s potentially indicative of farmer sentiment – they’ve been selling into this rally and thus might be willing to sit on grain stocks for time being, either with on-farm storage or leasing off-farm storage. If that’s the case, cash prices will need to work even higher yet to free up inventory in storage.
As noted last week, the challenge now is to keep up with information flow as the combines get to work in earnest. All producers should monitor the market carefully; the corn complex influences every sector in some form or fashion – through both feed prices and the feeder market. Stay tuned!
Nevil Speer is based in Bowling Green, Ky. and serves as director of industry relations for Where Food Comes From (WFCF). The views and opinions expressed herein do not necessarily reflect those of WFCF or its shareholders. He can be reached at [email protected]. The opinions of the author are not necessarily those of beefmagazine.com or Farm Progress.