While corn producers have finally gotten into the fields and are making good inroads regarding planting progress, the new crop contracts for corn have been a bit disappointing.
“The story for corn is kind of similar to that of soybeans in that it’s been very disappointing in the new crop contracts in particular,” said Ed Usset, professor emeritus and grain marketing economist with the University of Minnesota’s Center for Farm Financial Management.
“The futures have been on the defensive…new crop, old crop, etc. Basis is not on the defensive. In southwestern Minnesota, they’re getting 30 (cents) over the July,” he said. “Just this morning (May 8), I went back 30 years, and that’s the best basis we’ve ever seen in southwestern Minnesota in early May. It’s even better than in 2013, a post-drought year. We were hanging around there (then), but not quite as high.
“It’s a great basis. It tells me that there’s still a need for corn from ethanol plants and other players that just don’t have much corn and still need to keep the pipeline going,” he added.
But having said that, Usset noted that the board is not strong, pointing out that at the start of the marketing year new crop futures – December 2023 – were at $6 a bushel but then skipped lower in late February/early March. Futures prices then hung around the $5.60 to $5.70 area for a couple months and then started to slide in mid-April, going from $5.65 all the way to $5.25.
“That’s a 40-cent slide. (That’s) not good. And this morning (May 8) we’re hanging around $5.30,” he said. “I believe this is well below my minimum price objectives, below production costs.”
Another point of the corn story that’s similar with soybeans is that producers of both crops are likely wishing they would have gotten more new crop contracts done earlier when futures prices were better.
“I’m sure there are a lot of your readers who are thinking, ‘Gosh, I wish I would have gotten more (new crop contracts) done early.’ But this is contrary to a typical year. Here we are in spring and the market is weak, not strong,” Usset said.
“But we’ve seen it before. It’s not common, but it’s also not rare. We’ve seen it before,” he continued. “And most of those years give us another shot (for a rally) in June/July, so my own thought is I’m going to keep my powder dry. I’m not going to chase it lower. I’m going to see if something will drive this thing higher to give me another shot.”
Source:agupdate.com
Photo Credit: GettyImages-Yasonya
Categories: Minnesota, Crops, Corn