The combines are rolling and harvest is moving into full gear. However, there are mixed signals being sent to the corn market. This piece will explore four keys market drivers influencing corn prices. Furthermore, these factors are also influencing the broader grain market as well.
Corn Yields and Crop Condition
Crop conditions and anticipated yields have been strong for most of the season. Last week’s report offered nothing but continued confidence in a strong yield. Kristy Foster Seachrist of Corn and Soybean Digest penned a piece last week titled, “Corn, Soybean Conditions Steady”.
Ahead of Pace
Seachrist’s story detailed the USDA’s crop progress report’s key findings. The good/excellent rating of both corn and soybean ticked up by a percentage point. In comparison to last season’s crop at this point, both corn and soybean crops are 8% points higher in this category.
Additionally, nearly all corn has reached the dented stage, at 97%. Furthermore, the maturity of this season’s crop continues to be ahead of the four year average.
It’s 72% this week, up from the four-year average of 53%.
Even harvest activities are ahead of pace verse the four-year average, 16% vs 11%.
Strong Corn Yields
There are even indications that yields could exceed USDA’s rosy outlook. Farm Future’s story “Feedback From The Field – Oct 1, 2018” noted that growers reporting feedback,
“rated crops and yields better than the USDA reported both in its Crop Progress report and Sept. 12 production estimates.”
Brownfield Ag News conducted an interview with Bill Mullen, an agronomist with Ohio-based Maria Stein Grain.
Despite weather challenges overall Mullen had this to say about soybean and corn yields in the eastern corn belt.
“Our soybeans are going to be as good or better than we’ve seen in the past couple years,” he says.
He says he thinks corn yields will also be good, but there have been some crop development issues.
“I’ll be a realist, we know there are some issues out there with water early and we had some stress conditions,” he says. “Hopefully we’ll have corn yields like we did two years ago,” he says.
Based on the trajectory of the season and all indications at this point, the bears in the market will be pleased, if the weather allows the corn can be brought in from the fields.
Emily Unglesbee wrote a piece for DTN/PF titled, “Soggy Harvest, Rainy Fall Conditions Could Compromise Corn, Soybean Crop”. Ungelsbee begins her piece with a ominous warning for growers.
“Rainy weather across large swaths of the Corn and Soybean Belt is threatening to delay harvest and cause problems for growers.”
Unglesbee goes on to quote her DTN/PF colleague Bryce Anderson’s forecast for wet and harvest weather impacts.
“That wet area of the northwestern Midwest will continue to be in line for rain, so I think that growers will continue to have a slower pace of harvest, and some crops could be knocked down by thunderstorm winds. It’s also going to be cool which will slow down the pace of drying for fields to support machinery. Wetter areas of the Southern Plains will have less moisture over the next week, which will be favorable, along with a lighter precipitation outlook in the southeastern Midwest. The Gulf Coast and Deep South will have some heavy rain and there could be some damage to cotton with the bolls open and prone to damage from rain.”
These kinds of conditions can offer challenges to successfully bringing the corn in from the fields.
Unglesbee offers this advice from Bob Nielsen, a corn agronomist with Purdue University.
“Once you hit maturity with corn, as stalk deterioration progresses — which is just the normal decomposition that occurs — the plant will simply get weaker and weaker and more vulnerable to any strong wind. That’s my concern — standability.”
But its not just the stalks to be concerned about. Lengthy periods of rainfall or wetness can cause other problems.
“An extended wet period can lead to pre-harvest sprouting at the base of cob on upright ears or the tip of cob especially if tip kernels are damaged or have mold,” Nielsen warned.
Furthermore, prolonged moisture can worsen mold problems and grain quality. This can leave growers with a grain storage problem.
Nielsen recommends that corn be harvested “around 18% to 22% moisture for minimal harvest loss.”
If too many harvest weather challenges threaten the corn belt, what appears to be a record crop may be lost in the fields. A sad but bullish development.
Kevin Van Trump of Corn and Soybean Digest offered this headline about the corn market: “Strong Demand Is Keeping the Corn Market Going”.
Van Trump notes that demand in the US remains strong. Also a recent and significant sale of corn to Mexico. Additionally, a new demand side increase could occur as “Pressure Mounts for EPA to Allow E15 Year-round“.
This narrative has been at play all summer; strong demand for corn. The question will be, is it strong enough to overcome other bearish factors and push near-term prices higher?
The final variable playing a huge role in the corn market are trade concerns. While the corn market has had fewer headlines than the soybean market around trade, our market access is still very important to the price U.S. growers get at the local elevator.
The NCGA submitted calculations to USDA estimating corn losses due to trade disputes at $6.3 billion, or 44 cents a bushel for the 2018 crop.
You can read more about the impact trade disputes have had on commodity prices in Ag Nook’s story “USDA Spills the Beans on Trade Aid Formula”.
Ensuring U.S. growers have unfettered access to the strong global demand will be paramount to ensuring strong local prices. A bullish development on the trade front was the announcement that Canada will join the U.S. in Mexico in a NAFTA 2.0. On the first trading day since the announcement most equity and commodity markets rallied as this agreement was viewed as very positive.
The corn market is wrestling with a number of factors in shaping its price. On the one hand, strong expected yields and trade turmoil over the summer have stymied the markets. On the other hand, challenging harvest weather and overall strong demand have tried to push the markets higher.
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