Market Analysis




Will corn get to $7.50?

By Jon Scheve, Superior Feed Ingredients, LLC

The corn market shook off bearish news and closed nearly 10 cents higher last week.

Basis values in the west have been very strong, which is pulling corn from the middle of the U.S. to the southwest. This increased corn demand seems to be causing the December to March futures spread to narrow into a very small carry, which is incentivizing commercial elevators to let go of their stored corn as soon as possible.

Since U.S. farmers are generally not selling, the market is begging for grain right now. However, with reduced supply in the southwestern corn belt and a tight carryout overall, some farmers think corn futures will follow the pattern of the last two years and trade above $7.50 by spring.

As always, the corn market is complex and there are many factors impacting prices right now. The following summarizes both sides.

Reasons corn could rally to $7.50

  • Argentina’s yields were devastated by La Niña the past two years, and there is reason to believe it will happen again this year with the weather phenomenon expected to last throughout most of the growing year. There
Continue reading

Read More »

Neutral Nov. 9 numbers

By Doug Tenney, Leist Mercantile

Numbers highlights: corn exports unchanged, big surprise there. Corn for ethanol was unchanged. Soybean exports unchanged, soybeans for crush up 10 million bushels.

Following the noon report release, corn was down 2 cents, soybeans down 2 cents, and wheat  down 9 cents. Prior to the report, corn was down 5 cents, soybeans up 7 cents, and wheat down 11 cents. 

U.S. corn production was 13.930 billion bushels and a yield of 172.3 bushels per acres. Last month was 13.895 billion bushels for corn with a yield of 171.9. U.S. soybean production was 4.346 billion bushels with a yield of 50.2 bushels per acre. Last month was 4.313 billion bushels with a yield of 49.8 bushels. 

Trader estimates had U.S. corn production at 13.887 billion bushels and yield at 171.9 bushels. U.S. soybean trader production estimate was 4.315 billion bushels and yield at 49.8 bushels. 

U.S. 2022-2023 ending stocks: corn 1.182 billion bushels, last month 1.172 billion bushels; soybeans  220 million bushels, last month 200 million bushels; and wheat 571 million bushels, last month 576 million bushels. … Continue reading

Read More »

Market factors to watch in November

By Jon Scheve, Superior Feed Ingredients, LLC

There are rumors circulating that China will relax COVID protocols in early 2023, which the market thinks will lead to a fresh round of commodity buying. This, combined with continued Chinese soybean purchases and export pace running slightly above USDA estimates, is giving beans some upside momentum.

Corn export pace long term continues to be a concern but hope rests with the feed category being able to make up the difference. Western basis values suggest corn futures are undervalued while the eastern market indicates the opposite.

The market continues to watch the Black Sea for more understanding of export capacity potential. The market rallied quickly when the door seemed to close, but then pulled back when it seemed to open again. War is difficult to predict, so this will be an area of risk in both directions moving forward.

There will be another USDA report on Nov.… Continue reading

Read More »

What will break the sideways trading pattern?

By Jon Scheve, Superior Feed Ingredients, LLC

Throughout October, of the possible 21 times, the soybean board traded $13.83 18 times. Corn traded $6.83 19 out of 21 times. Clearly the market is in a sideways trading pattern and is searching for a reason to move higher or lower, but there are several variables impacting market direction.

Ukraine grain corridor

The warring parties in Europe agreed to a 120-day grain export corridor in the Black Sea that will end in mid-November, unless an extension agreement is made. Russia has indicated it is not happy with the current arrangement and will not renew the agreement.

Without an agreement, there will be less grain available from the Black Sea region and a futures rally would be expected. On the flip side, should a deal be brokered, and a continuation of the agreement put in place, it could put downward pressure on prices. 

U.S.… Continue reading

Read More »

What’s in your tool box?

By Jon Scheve, Superior Feed Ingredients, LLC

Throughout October, the corn market has traded within a tight 25-cent range. Lack of farmers selling has kept prices from declining much during harvest. However, world economy concerns are also keeping prices from increasing.

During the same time, soybeans traded within a 50-cent price range. Again, lack of farmers selling, plus lower than expected yields in the west, is keeping a floor under prices. Right now, the economy and the potential of Brazil’s next crop are keeping prices in check.

Last month I was on the farm helping with harvest. While fixing a broken sickle, I looked inside the toolbox at the many tools we carry on the combine to fix potential problems in the field. It reminded me of all the grain marketing tools we use to price the grain we are harvesting.

Just as most farmers know how to use their tools and would not go to the fields without them, farmers should be knowledgeable about the grain marketing tools available to them too.… Continue reading

Read More »

Demand scenarios moving forward

By Jon Scheve, Superior Feed Ingredients, LLC

Following are the highlights of last week’s USDA report that provided more information on the U.S. grain supply.

Corn

While the USDA decreased the average national yield, most of the country’s best corn areas still need to be harvested. Right now, it is uncertain if yields in the east that have not been harvested will make up for the disappointing yields in the west that have been picked.

Considering the value of U.S. corn compared to the rest of the world, it seems reasonable that the USDA decreased export demand. However, their feed estimate is almost 7% lower than the last 4-year average, which may be too low. While the trade still believes exports could decrease a few more bushels, the feed category may have room to offset further export reductions.

The chart below shows current USDA estimates with several different demand scenarios (highlighted in blue) and a range of potential outcomes to the carryout.… Continue reading

Read More »

Mixed report, corn bearish, soybeans bullish

By Doug Tenney, Leist Mercantile

Major surprise for soybean ending stocks to be unchanged.

Following the noon report release, corn was down 9 cents, soybeans up 15 cents, and wheat  down 20 cents. Prior to the report, corn was down 2 cents, soybeans up 2 cents, and wheat down 12 cents.

Today, there are numerous moving parts, more than normal, to the monthly USDA WASDE (supply and demand) Report. Changes can include 2021 corn and soybean production, US grain exports, and 2022 corn and soybean production and yields. Brazil is expected to set another record for soybean production this growing season. Soybean imports into China will be closely watched to see if demand is slowing. 

Numbers highlights: US corn exports down 125 million bushels, US corn for ethanol down 50 million bushels, US 2022-23 corn ending stocks down 47 million bushels, and 2021 US corn production down 41 million bushels. US soybean exports down 40 million bushels, US soybean crush up 10 million bushels, US soybean 2022-23 ending stocks unchanged, US 2021 soybean production up 30 million bushels.… Continue reading

Read More »

Plenty of price uncertainty remains

By Jon Scheve, Superior Feed Ingredients, LLC

Corn and beans finished the week at the same price level as one week ago. With harvest in full swing and no significant weather issues forecasted that would slow progress, this seems to be a positive sign for prices moving forward.

However, there are still a lot of unknowns in the market that need to get answered before we have a better sense of upcoming price direction and ranges.

Yields

The biggest unknown is what the national average yield will be. The market will have a better idea Wednesday when the USDA publishes their updated supply and demand estimates. Currently there is a wide range of guesses for both crops, so depending on what is published, there could be big price adjustments.

Ukraine

It is uncertain if the current export corridor program that allows grain to be shipped out of the Black Sea will be renewed in November.… Continue reading

Read More »

Is $8 corn possible?

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

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.

Ukraine

The Russia-Ukraine situation still needs to be monitored closely. With Russia annexing 15% of Ukraine, western countries are applying more sanctions.… Continue reading

Read More »

Bullish corn, bearish soybeans in U.S. Quarterly Grain Stocks

By Doug Tenney, Leist Mercantile

Today is USDA report day for U.S. Quarterly Grain Stocks. The monthly supply and demand report (WASDE) will not be published today, that report will be on Oct. 12.

Corn stocks were below trade estimates while soybean stocks were 32 million bushels above trade estimates.

The Sept. 1 grain stocks were: corn 1.377 billion bushels, soybeans 274 million bushels, wheat 1.776 billion bushels. 

Average trade estimates for Sept. 1 grain stocks: corn 1.512 billion bushels, soybeans 242 million bushels, and wheat 1.776 billion bushels.  

Just after the noon report release, corn was up 12 cents, soybeans down 18 cents, and wheat up 27 cents. Prior to the reports, corn was up 9 cents, soybeans up 9 cents, and wheat up 15 cents. Earlier this morning at the 8:45 am pause, corn was up 4 cents, soybeans up 6 cents, with wheat up 11 cents. 

The U.S.… Continue reading

Read More »

Store corn or beans?

By Jon Scheve, Superior Feed Ingredients, LLC

Currently the corn harvest is about 13% complete nationally. As the new crop crosses the scale, the futures market likely adjusts based on how many farmers are selling. Early indications suggest landowners on share crop and farmers with limited storage capacity could be satisfied with prices around $7 and will likely move forward with spot sales. As harvest continues this trend could intensify and push prices lower.

Also, as harvest continues throughout the Midwest, basis values are coming under pressure. There may still be some short-term opportunities where harvest is not as far along yet, but those basis bids will fade fast over the next 10 days. 

What to store, corn or beans?

Every year as harvest starts farmers ask me which crop should be stored if they do not have 100% on farm storage.

Analyze interest cost by crop

The first step to maximize profitability is to analyze the cost per bushel per month to store each crop. To… Continue reading

Read More »

Sorting out the September numbers

By Jon Scheve, Superior Feed Ingredients, LLC

The September USDA report showed corn carryout may end up being one of the tightest since 2012. While the yield estimate dropped to trade expectations, the USDA also decreased the harvested acre estimate by another 1 million. This is nearly equivalent to lowering the national yield by another 2 bushels per acre.

While this is good news for producers, and could mean the tightest carryout in a decade, it does not guarantee the market will eventually trade above $8. Higher prices may restrict global demand. With worldwide recession concern, and the U.S. dollar at a 20-year high, corn usage around the world may ration itself at these price levels.

Seasonally, the market usually pulls back as harvest moves north in late September. Therefore, the market may be range bound for the next 4-6 weeks between $6.50 and $7 until more is known about the actual size of this year’s crop.… Continue reading

Read More »

Avoid a case of “backyard-itis”

By Jon Scheve, Superior Feed Ingredients, LLC

The market is struggling to accurately estimate yields in the field. Plus, demand remains uncertain, especially with China’s new COVID city lockdowns this past week. Concern over the world economy has kept pressure on the markets as well. It seems the market could be in a holding pattern until the Sept. 12 USDA yield report is released.

“Backyard-itis” describes farmers who feel the weather conditions in their immediate area are more widespread than they really are. Usually, it happens when a farmer’s crops are not doing well, but I occasionally see it the other way too. A common symptom of this “disease” is wondering why the markets are not reacting as much as they should, given the weather conditions a farmer is seeing nearby.

Recently, I have seen many social media posts of farmers with their corn ears estimating yield potential. Like every other year, there are WAY more posts showing potential production issues compared to healthy ears.… Continue reading

Read More »

A look at the stocks to use ratio

By Jon Scheve, Superior Feed Ingredients, LLC

The recent Pro Farmer Tour estimated a national yield of 168.1. If this happens prices will skyrocket much higher, because the lower yields would decrease carryout, and demand would have to be rationed.

However, in 8 of the last 10 years, the Pro Farmer’s corn yield estimate was between 2 and 6 bushels below the final USDA yield estimate posted in January. The market seems to be disregarding the Pro Farmer estimate though, and instead, is trading something closer to the August USDA production estimate. Weather data throughout the corn belt, along with satellite imagery, is indicating that yields are likely still in the mid 170s. 

Comparing the stocks to use ratio between crop years is a common measure for determining how tight carryout is compared to other crop years. It essentially accounts for yield and demand inflation over time. It is calculated by taking final carryout divided by total usage. … Continue reading

Read More »

Basis vs. spread

By Jon Scheve, Superior Feed Ingredients, LLC

Under the new export agreement for Ukraine, over the last 18 days Ukraine loaded over 25 vessels averaging nearly 25,000 tons each, which means exports now total just over 625,000 tons this month. The Ukrainian government’s goal is to load 3 million tons per month, so they are behind. Even if the pace or load size of the vessels increased to their goal, moving 3 million tons per month is not enough to move all the remaining 2021 harvested grain still trapped in Ukraine a year from now. That means there is uncertainty over where the 2022 harvested grain will be stored over the next 2 months, let alone when the new crop will ever be exported. 

There are also concerns about how much winter wheat will be planted in the next two months in Ukraine. There is even concern about how much wheat gets planted in the United States during this time because of high fertilizer values. … Continue reading

Read More »

USDA report highlights

By Jon Scheve, Superior Feed Ingredients, LLC

The latest USDA report decreased the average national yield from 177 to 175.4, slightly below the average analysts’ expectations of 176. To offset the supply drop, the USDA also lowered corn demand in every category between both marketing years. While these numbers seem bullish long term, precipitation over the next week throughout the Corn Belt, as kernel fill finishes, will be a big factor. With what we know today, average yield potential is likely limited to a 174 to 176 range.

The following chart analyzes potential carryout scenarios based on yield variances. This illustrates carryout may be tighter than last year. The supply estimates should keep a floor value under corn futures moving forward, while demand will likely contribute to price potential the rest of the year.

Europe continues to have one of the worst droughts in history. Corn yields are currently down 10%, with estimates it could fall another 10% over the next 2 months.… Continue reading

Read More »

Soybean yields higher than expected in bearish report

By Doug Tenney, Leist Mercantile

Following the noon report release, corn was down 8 cents, soybeans down 30 cents, and wheat down 25 cents. Prior to the report, corn was up 3 cents, soybeans up 15 cents, and wheat down 19 cents. 

Note that with this August report, NASS is no longer using farmer surveys to provide yield estimates. The corn and soybean yield estimates will be a best guess scenario by the World Outlook Board. The Annual Pro Farmer U.S. Midwest crop tour will take place in two weeks.

Weather continues to be a major market driver for the grains. The central and western Midwest have been among the dries areas of the cornbelt. During the past two weeks there have been multiple shifts in forecast expectations of warm and dry or frequent showers. The American and European weather models have sometimes detailed forecasts which are opposite of each other.… Continue reading

Read More »

Ukraine situation and other market factors to watch

By Jon Scheve, Superior Feed Ingredients, LLC

Four ships loaded with wheat and corn left Ukraine on Friday of this past week. Another four loaded over the weekend. However, it will still take another 500 to 1,000 ships pending the average size of each vessel to move the remaining grain still left in storage there. The deal negotiated 3 weeks ago set a goal of loading three ships per day out of Black Sea ports, with a renewal of the agreement every 120 days. While the deal has potential, logistically it is not a guarantee all the old crop in storage will be moved in time to provide enough room for the new crop being harvested.

It is still uncertain how many acres will be planted there this fall and next spring. Insurance costs to move grain out of Ukraine by ship has increased by 20 times, which will be passed down to the producer in that country.… Continue reading

Read More »

A look at 2021 corn marketing

By Jon Scheve, Superior Feed Ingredients, LLC

The market is in a holding pattern until more is known about the national yield. Weather forecasts for extreme heat and limited precipitation over the next two weeks is a concern. The upcoming August 12 USDA report is one of the more important of the year because it will release the first satellite yield estimates and include a planted acres update. Plus, the market is still wondering if grain will be shipped out of Ukraine by Black Sea routes. With all of these unknowns, substantial price risk in either direction remains.

2021 corn marketing summary

Following provides an overall summary of the trades I made for the 2021 crop year. To evaluate the full potential of a marketing year, it is important to analyze the three variables that make up the cash price received: futures, basis and carry.

Futures

For the crop years 2013 through 2019, the most profitable marketing approach was to be 100% priced on futures before harvest.… Continue reading

Read More »

Variables currently impacting the market

By Jon Scheve, Superior Feed Ingredients, LLC

While there has been widespread hot weather, only 25% of the Corn Belt is experiencing drought conditions. Based on what we know today, the national yield average could still hit the 177-trend line level.

Ukraine, Russia, and Turkey signed a deal allowing grain to be exported from several Ukrainian ports in the Black Sea. The deal included conditions that require renewals every 120 days. Long-term this may create issues, but the market did not react all that negatively to it on Friday. Then on Saturday Russian missiles hit a port protected in the agreement. Today Ukrainians are claiming they will still try to export grain as the deal is outlined. This story seems far from over.

High gas prices have curtailed some usage, which means less ethanol consumption too. About a third of corn used for ethanol is converted to DDGs in the production process, which means some additional feed demand could be found. However,… Continue reading

Read More »