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Corn and COVID: How has the grain market reacted?

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Here’s why crop carryover is important

All sorts of words come to mind when trying to describe 2020. No matter the industry, the challenges have been unprecedented – and that principle certainly holds true for the beef industry.  And along the way, the corn market of late has added to those dynamics. 

Corn market watchers know that corn futures have staged a significant rally in the past 60 days. For example, the December corn contract bottomed at $3.20 per bushel in early August. The contract closed at $3.95 on Friday, Oct. 9.  

There are multiple factors driving the current rally.  But if you’re not involved in the daily intricacies of the market, the most important thing to watch is projected carryover. USDA and market analysts continually project carryover going into, and throughout, the crop marketing year (Sept. 1 to August 30).  

This week’s graph highlights USDA’s projected carryover for the coming crop year, and a lot can change as we get into the heart of harvest. Nevertheless, in May and June, carryover was being projected around 3.2 billion bushels.

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The most recent WASDE report (Oct. 9) pegged carryout at around 2.2 billion bushels. Stated another way, carryover has gone from being 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.  

In other words, supply is going to be far tighter than the market was guessing (largely based on USDA estimates) back in early summer. The challenge now is to keep up with information flow as the combines get to work in earnest. Stay tuned – this could turn out to be yet another important story to close out 2020.  

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 nspeer@wherefoodcomesfrom.comThe opinions of the author are not necessarily those of beefmagazine.com or Farm Progress.

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