By Jon Scheve, Superior Feed Ingredients, LLC
The USDA Stocks Report surprised the market with less corn in storage than previously estimated. This could lead to a carryout that is the tightest since 2012, and values may need to exceed $8 again to ration demand. However, there are several unknown variables that could affect the market moving forward.
Demand seems to be weakening and it is still unclear by how much. The area of demand that is getting the most attention and concern is in the exports category. Currently, exports are expected to be 10% lower than last year and 20% lower than two years ago, when futures exceeded $8. Plus, the market seems to think exports could fall another 10%, which would be a little bit more than the amount found missing in the September stocks report.
The Russia-Ukraine situation still needs to be monitored closely. With Russia annexing 15% of Ukraine, western countries are applying more sanctions. The market will be watching to see if the current export corridor out of the Black Sea is closed off after November.
Mississippi River water levels
There is also concern over significant decreases in the Mississippi River’s water level. New record low levels may be hit, which would lower the amount of corn that can be exported over the next couple of months. This could impact total export pace next year if it continues.
Slowing global economy
As the world economy slows down, corn demand everywhere may be impacted. With a U.S. dollar at the strongest levels in 20 years it means U.S. commodities have trouble competing on the world stage.
Ethanol grind may be slowing due to decreased gasoline usage from a slowing economy.
The final average U.S. yield is still uncertain and could move in either direction. Focus will then shift to South America as the market looks for any production issues in their next crop from the elevated chances of a third year La Niña.
Corn prices have been impacted by a lot of negative news already. As harvest continues, there may be some additional downside pressure. However, once the bins are filled and doors are locked, it may be difficult to pry corn out of farmers’ hands at current price levels.
Please email firstname.lastname@example.org with any questions or to learn more. Jon grew up raising corn and soybeans on a farm near Beatrice, NE. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.
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