Jon Scheve with weekly market commentary made on February 14, 2025
The February USDA report was published, and like usual, it didn’t impact the market much. For the last 18 trading sessions, corn has finished in a tight $4.80 to $5.00 trading range.
What are some variables that could cause the market to move out of that tight range?
Weather
Argentina has been experiencing hot and dry weather with limited precipitation during the critical growth stage of their corn crop. Their yields will likely be lower than normal, but it is uncertain by how much. Current estimates range between 5% and 10%.
Mato Grosso Brazil, where nearly 50% of the second corn crop is raised, is facing the opposite problem with too much rain. This is delaying their planting season, which optimally happens in February. While the planting pace is behind, it isn’t too bad yet. Plus, a late planted crop doesn’t necessarily guarantee a yield reduction.
Exports
The US export pace has been very good and many market participants expect an increase in future USDA reports. This could keep a floor under prices moving forward.
However, there are concerns Argentina’s farmers haven’t sold much of their currently growing crop. As harvest approaches, they may feel comfortable selling more at these higher values. This could keep a lid on prices, especially if there is some well-timed rainfall over the next month.
Ethanol
Some traders have pointed out that ethanol production is higher than USDA estimates, and corn grind may be increased in future reports. If true, this would be supportive of current market values.
On the other hand, there is a bearish theory by a few market participants that this year’s drier corn is producing slightly more ethanol per bushel than corn with a higher moisture content in previous years. Therefore, these traders suggest that the corn used for the ethanol estimate could be decreased slightly in future reports.
Another bearish concern is that many ethanol plants keep improving their fermentation process efficiency each year, which produces more ethanol from each bushel they grind. The theory here is that there is no need to increase the corn used for ethanol in future USDA reports.
And finally, a lot of sorghum/milo is being ground for ethanol in the south. This is displacing some corn that now needs to find a different home.
Feed
Overall, US animal numbers are not up from last year, which makes it difficult to see feed demand increased. Plus, higher prices force feeders to consider alternative ingredients. The current wheat / corn spread supports the theory that feed demand will be lowered in future reports.
Bottom line
The USDA carryout number may have trouble going lower. Any export increase could be offset by decreased feed. This could mean the market will stay in the current trading range for a while.
The next big factor for a change in May and July futures prices will be the weather in Mato Grosso in April and May during the pollination stage of their second crop.
Jon Scheve
Superior Feed Ingredients, LLC
9358 Oak Ave
Waconia, MN 55387
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