Jon Scheve with weekly market commentary made on May, 5, 2023
With old crop corn bouncing 30 cents off the lows from earlier this week, the following summarizes some market factors contributing to current price movement. Ukraine Uncertainty Some of the rally is likely due to the Ukraine grain corridor discussions and whether Russia will be renewing the deal. Russia’s deadline for a decision is May 18th, debates as to if it will continue will occur until then, and likely well after that date too regardless of the outcome. Wheat Production Issues Another reason for the rally may be severe reductions in hard red winter wheat yields in the southern plains. If Kansas City wheat prices could continue to trade higher the next few weeks, it likely keeping wheat from replacing corn in feed rations. Recession? Some financial analysts this past week were suggesting the recent economic data shows a recession may be becoming less likely and a “soft landing” is possible. If so, funds may either stop selling, look to cover some of their short positions, or even go long again. But, with the third bank failure this week, funds may not want to be buyers of anything yet. Exports China’s recent corn purchase cancellations have been contributing to price declines as well. If export pace does not stay the course or increase, then it is very difficult for prices to rally. Other Reasons Prices Could Rally
From a technical standpoint corn is oversold and needs to bounce higher.
While May corn is in delivery, it is gaining on the July contract. This suggests corn should not be delivered and it is worth more than the market is suggesting on futures.
Basis values throughout the US turned higher this week. This is likely because farmers have no interest in selling at these values. It is unlikely farmers will sell much until after the July 4th weekend, because they are unsure what summer weather conditions will be.
May 12th USDA Report This will be the first look at demand for next year. Last month’s acreage report combined with trendline yields and using a 3-year average usage would seem to mean a potentially bearish report coming up for the new crop. However, the market may now have this “bearishness” factored in already, and a report that meets expectations could turn out to be bullish instead.
Jon Scheve Superior Feed Ingredients, LLC
9358 Oak Ave Waconia, MN 55387 jon@superiorfeed.com