Corn prices should come under seasonal weakness in coming weeks as U.S. harvest activity picks up, but futures trade may remain volatile with strong demand offsetting the impact of large new-crop supplies.
The corn crop is maturing at a near-record pace with USDA reporting that 54% of U.S. corn was denting as of Sunday, Aug. 22, far ahead of last year’s 17% and the five-year average of 37%, while 8% of the crop was already mature, vs. only 3% last year and a five-year average of 6%.
USDA data indicates the only times that crop development was farther along in mid-August were in1987 and in the severe drought year of 1988.
Scattered harvesting has begun in the southern Corn Belt, putting increasing downward pressure on prices despite strong export demand. Corn harvest has started for real in Kansas, with that state’s crop reported 3% harvested as of Sunday.
The quality of early harvested corn has been very good so far, which is something that U.S. exporters are no doubt happy to hear. They continue to scramble to find sufficient supplies of good quality corn to mix with large stocks of No. 3 corn from the 2009 crop.
Reports from cash sources on Tuesday morning indicated Gulf export terminals were offering 12-14¢ over published price bids for No. 1 quality corn.
Exporters should have large shipments to make in early 2010-2011. Export demand for U.S. corn has been very strong recently with end users concerned locking in supplies due to the short grain crop in the Black Sea region and USDA’s tight U.S. supply/demand forecast, which indicates a stocks-to-usage ratio for 2010-2011 of 9.7%, the lowest since 2003-2004.
The weekly sales total of 113.7 million bushels reported for the week ended Aug. 12, which included sales of 90.3 million bushels for 2010-2011 delivery, was the largest weekly export sales total since December of 1994. Advance corn sales for 2010-2011 delivery have now moved 11% ahead of a year earlier.
There should also be a significant carryover into the new marketing year of sales that were originally made for 2009-2010.
There are widespread ideas U.S. exports will wind up stronger than USDA’s current estimate of 2.050 billion bushels, which could cause the stocks-to-usage ratio to grow even tighter.
However, export buyers should back away from the market for awhile if they are convinced that prices have put in a pre-harvest high and will move lower as new-crop supplies become available.
Fall price weakness could wind up worse than expected if the performance of the general economy continues to deteriorate.
Falling crude oil and gasoline prices are putting pressure on the ethanol market with the premium held by unleaded gasoline futures over ethanol futures having fallen to only about 4¢ as of Tuesday morning.
Editor’s note: Richard Brock, Corn & Soybean Digest’s marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.