Ag/Business
Harvest conditions reflected in late 2009 corn prices
Both futures contracts and cash prices showed patience with price discovery as the corn harvest continued into late November. There just wasn't enough of the crop harvested to take prices higher or lower.
As of Nov. 21, 68 percent of the U.S. corn crop was harvested vs. 94 percent on average.If the U.S. does have a 13 billion bushel corn crop, that means just 8.84 billion bushels were harvested by that date.
As of Nov. 21, 68 percent of the U.S. corn crop was harvested vs. 94 percent on average.If the U.S. does have a 13 billion bushel corn crop, that means just 8.84 billion bushels were harvested by that date.
Randy Martinson, of Progressive Ag in West Fargo, says despite the slow harvest, corn supplies are adequate.“It would be enough to get through to spring. Let's say it snowed and everybody had to stop combining. We would be able to go back in the spring and get the crop out,” he said. “Not that many years ago, a 9-billon bushel crop would have been a big crop.”
On Nov. 25, the CME Group exchange closed with the December contract at $3.91, March at $4.07, May at $4.17, July at $4.27, September at $4.34 and December 2010 at $4.40 per bushel.
Compared with prices on Nov. 12, contracts were just 1 penny higher for December, March and May, while July and September were 3-4 cents higher. The contracts have shown daily volatility over 10 cents per bushel.
The contract charts available at www.cmegroup.com have a lot of useful information right now. The corn futures were trading $3.60-3.70 per bushel on the low end, and $4 to $4.10 per bushel on the high end, Martinson pointed out.
While it looks like all of the U.S. corn will eventually arrive at the elevator, the verdict on quality is still out. “The crop is coming in pretty decent,” Martinson said. “Early on, there were issues with mold and surface molds on the kernels. That seems to be subsiding now.”
On the macroeconomics level, limited demand for corn concerns Martinson.
“Demand has pulled back. Our corn exports haven't been that stellar,” he said. “We have a near-record corn crop coming in, and we have poor demand and increasing stocks. That's a bearish situation.” He doesn't expect U.S. corn demand for ethanol or feed to increase drastically.
Global coarse grain stocks decreased, though, and soybean stocks remain tight.Corn is a commodity, but the individual producer will ultimately be paid on the quality of his or her own corn production this year.
At one elevator in west central Minnesota, cash corn on Nov. 25 was $3.32 with a basis of minus 60 cents. That price was 2 cents lower and the basis was 3 cents wider than on Nov. 12. The job of elevator manager is not one to envy this fall. Test weight is a large worry. Some corn exhibits lower than desirable test weight, but there is also a lot of variability.
“A lot of concern starts to come in once the test weight drops below 50 pounds. A lot of ethanol plants won't take it, and even some industrial uses,” said Martinson. “The only market for low test weight corn is feed demand.”
Moisture is another worry, with corn measuring 19-30 percent. Just as the market is exhibiting patience with the slow harvest, the producer is exhibiting patience with drying the corn. “It takes a long time to dry that crop - that's probably the biggest issue,” said Martinson. “Producers are using lower temperatures so they don't burn the corn. That would be an issue, if you start hauling that to the elevator.”
Progressive Ag had clients in the Red River Valley that chose to harvest 2008 corn in the spring. The product had good test weight and color. “It was good corn they hauled straight to the elevator, and they had no drying costs,” he said. “It worked very well to let the corn sit in the field last winter. Every year is different, so we don't know how well that's going to work this winter.”
Producers need to look at the numbers if their corn remain 30-35 percent moisture or higher and have an average test weight of 48 pounds per bushel. Trying to dry that corn down will cost a lot of money. Martinson says he is keeping an eye on the “carry” in corn - how much the producer can be paid to store the corn on his or her own farm. Once the crop is harvested, and producers know what kind of quality they have, Martinson may suggest selling the carry and holding the corn in storage.
“Producers will have to watch their corn storage,” he warned. “If you have high moisture corn, and you have some poor test weight corn, you have to watch that to see what kind of storage issues there might be - heating up or mold in the bin.
“You have to monitor that corn weekly, not monthly or quarterly.”
Compared with prices on Nov. 12, contracts were just 1 penny higher for December, March and May, while July and September were 3-4 cents higher. The contracts have shown daily volatility over 10 cents per bushel.
The contract charts available at www.cmegroup.com have a lot of useful information right now. The corn futures were trading $3.60-3.70 per bushel on the low end, and $4 to $4.10 per bushel on the high end, Martinson pointed out.
While it looks like all of the U.S. corn will eventually arrive at the elevator, the verdict on quality is still out. “The crop is coming in pretty decent,” Martinson said. “Early on, there were issues with mold and surface molds on the kernels. That seems to be subsiding now.”
On the macroeconomics level, limited demand for corn concerns Martinson.
“Demand has pulled back. Our corn exports haven't been that stellar,” he said. “We have a near-record corn crop coming in, and we have poor demand and increasing stocks. That's a bearish situation.” He doesn't expect U.S. corn demand for ethanol or feed to increase drastically.
Global coarse grain stocks decreased, though, and soybean stocks remain tight.Corn is a commodity, but the individual producer will ultimately be paid on the quality of his or her own corn production this year.
At one elevator in west central Minnesota, cash corn on Nov. 25 was $3.32 with a basis of minus 60 cents. That price was 2 cents lower and the basis was 3 cents wider than on Nov. 12. The job of elevator manager is not one to envy this fall. Test weight is a large worry. Some corn exhibits lower than desirable test weight, but there is also a lot of variability.
“A lot of concern starts to come in once the test weight drops below 50 pounds. A lot of ethanol plants won't take it, and even some industrial uses,” said Martinson. “The only market for low test weight corn is feed demand.”
Moisture is another worry, with corn measuring 19-30 percent. Just as the market is exhibiting patience with the slow harvest, the producer is exhibiting patience with drying the corn. “It takes a long time to dry that crop - that's probably the biggest issue,” said Martinson. “Producers are using lower temperatures so they don't burn the corn. That would be an issue, if you start hauling that to the elevator.”
Progressive Ag had clients in the Red River Valley that chose to harvest 2008 corn in the spring. The product had good test weight and color. “It was good corn they hauled straight to the elevator, and they had no drying costs,” he said. “It worked very well to let the corn sit in the field last winter. Every year is different, so we don't know how well that's going to work this winter.”
Producers need to look at the numbers if their corn remain 30-35 percent moisture or higher and have an average test weight of 48 pounds per bushel. Trying to dry that corn down will cost a lot of money. Martinson says he is keeping an eye on the “carry” in corn - how much the producer can be paid to store the corn on his or her own farm. Once the crop is harvested, and producers know what kind of quality they have, Martinson may suggest selling the carry and holding the corn in storage.
“Producers will have to watch their corn storage,” he warned. “If you have high moisture corn, and you have some poor test weight corn, you have to watch that to see what kind of storage issues there might be - heating up or mold in the bin.
“You have to monitor that corn weekly, not monthly or quarterly.”