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Market Commentary for 5/21/21

Corn Both July and December corn futures closed higher this week compared to the end of last week and are still at or above levels from 3 weeks ago. Old Crop Corn The factors impacting old crop corn prices:

  • Chinese demand for old crop corn is still uncertain, as many in the trade debate how many bushels will be shipped versus being pushed into next year’s crop.

  • As the economy opens and people start driving to work or on vacations, ethanol consumption should increase.

  • Beneficial rain throughout the southern US is keeping the grass green and demand for feed stocks at levels that don’t strain the markets.

Old crop carryout is very tight. It seems many ethanol plants have coverage on through the first part of July, but August and early September is less certain. Plus, due to the large market inverse between July and September futures, it’s unlikely commercial elevators are going to be holding grain past July. Therefore, corn futures may see another rally to encourage sales on the remaining bushels owned by the farmer or potentially encourage cancellations from exporters. New Crop Corn The market is trying to determine how many corn acres were planted this year. The USDA’s March estimate of 91 million acres is expected to be too low. However, one private forecaster’s estimate of 96 million planted acres seems too high. And if there are additional acres, where will they be planted? Iowa seems unlikely, because farmers affected by the derecho last year won’t want to plant corn on corn due to volunteer corn issues. Fringes of the corn belt may pick up acres, but these aren’t the best corn production areas, so yields there likely will be lower. Weather is always a wild card. Long-term forecasts show good weather early, but potentially drier weather during pollination. Most years have a weather scare of some kind. The market seems to be trading a few more planted corn acres but with only a little weather risk right now. Beans July and November beans are still trading above values compared to three weeks ago. Old Crop Beans Most processors pushed hard to get their May, June, and July needs covered the week prior, as seen by the steep break in basis values across the Midwest this past week. Now the question is what will happen with the August and early September time frame because it’s unlikely many processors have covered any of their needs for that time period. Like corn, the market inverse is keeping commercial elevators from wanting to store beans past July. It also seems likely that most farmers have moved their beans already. So, there could be another upcoming bean rally with late summer demand needing some price rationing. However, Brazil still has a lot of production left to sell so there could be some switching of bushels from US production to Brazilian in the coming months. New Crop Beans With so many in the market focused on planted corn acres it seems that beans are being left out of the conversation. Beans need to add a lot more acres, they might need to add as many acres as corn does to keep carryout from being too tight. If the consensus is correct that most of any additional planted acres will likely go to corn, this should keep bean prices strong until the June 30th report is released. Bean prices seem to have minimal weather risk premium built in. Bottom Line: The market is unsure how many acres will be planted for each crop and the estimate range is wide. That means the price potential this year is wide too. Everyone is waiting for the June 30th report, after that, weather takes over as the biggest concern as yield will be uncertain until mid-July for corn and mid-August for beans. Additionally, export demand will continue to be a wildcard with most in the trade watching Chinese demand or cancellations. Expect big market swings for the next 60 days.

Jon Scheve Superior Feed Ingredients, LLC

9358 Oak Ave Waconia, MN 55387

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