Published 9:15 am Friday, December 6, 2024
Dan Steiner had a good feeling about the corn market last month.
Now that good feeling has been borne out, the Boardman, Ore., grain market analyst told the Capital Press.
“Our usage numbers on corn are just really, really strong,” Steiner said.
The USDA projects corn exports at 2.3 billion bushels this year — an increase from the original 2.1 billion estimate — which would require 44 million bushels per week.
“This last week we had 68 million bushels,” Steiner said. “At the pace we’re going right now, we’re going to easily exceed that 2.3 billion bushel export.”
The USDA estimated a 2.1 billion bushel carryover, but Steiner believes it will be about 1.8 billion bushels.
He also points to USDA ethanol usage projections, about 5.4 million bushels.
“Every week we are grinding 5.7 million bushels, and this is winter time,” he said. “So we’re on pace to easily beat the export number, and the ethanol usage number on corn.
“Every spring, it’s either too hot, too cold, too wet, too dry — and sometimes all of the above,” he added. “I’m actually friendly corn, I think there’s room to go up.”
On the price downside, the U.S. is on pace to have a large corn crop, Steiner said. And if South America winds up planting more soybeans than corn, U.S. corn acres could be up significantly in the spring.
Corn is currently priced at about $192 per ton.
“If you’re a farmer, it’s low; if you’re a feeder, it’s way too much,” Steiner said. “A farmer can make a little bit of money (at that price), but it’s not a get-rich thing.”
The cooperative bank CoBank pointed to several potential corn “headwinds” in a press release: Continued strengthening of the dollar and potential trade disputes and uncertainty over biofuel policy in the Trump administration.
“The export market outlook for U.S. corn and soybeans is most at risk in the months ahead,” CoBank stated. “The combination of ample supplies in the U.S., record crops from South America and retaliatory tariffs would cause a sudden drag on exports.”
The U.S. livestock sector will continue its feed demand, “although not enough to absorb potential losses in exports,” the bank said.
Wheat prices will follow corn “somewhat,” Steiner said.
“Everybody in the world can raise wheat,” he said. “As long as they can get an average crop or better, it’s going to be tough for us to make headway.”
Exporting 13 million bushels of wheat per week isn’t enough to get the market excited, he said.
The higher U.S. dollar also makes U.S. wheat less competitive, eventually the dollar will lose ground, Steiner said.
“That’s what happened — the dollar went down 1%, prices went up,” he said.
Steiner recommends basis contracts to take advantage of futures movement, swinging 40 to 50 cents, as the cash price lags in a 15-cent to 20-cent range.
Wheat prices have remained at the lower end of their 20-cent range for several months, from $5.90 to $6.10 per bushel on the Portland market, said Byron Behne, senior marketing manager at Northwest Grain Growers in Walla Walla, Wash.
“There’s not much breaking us out of that at this point,” he said.
Omaha, Neb., analyst Darin Newsom sees signs of commercial wheat buying, in a market that hasn’t had much interest.
There are ample supplies to meet demand, but the Chicago and Kansa City markets posted new contract lows last week.
“Sometimes low contract prices find buying,” he said. “Maybe it just turns out to be short-term, but it’s what we have right now.”
Newsom recommends farmers let the market run a little bit to see if it goes higher, taking advantage of new contract low “spikes,” that immediately turn around, calling it a “classic head-fake.”
“Wheat could spike because it’s been pushed down so far,” he said. While there’s not a bullish supply-and-demand element to fall back on, short covering orders could mean “if it hits a vacuum above it where there’s just no selling, that could lead to a healthy spike here in this quiet time of year, there’s not a lot of trade volume.
“You get enough short covering orders coming in, you could spike this thing higher, and it doesn’t have to have a fundamental reason to do so,” Newsom continued. “I think there’s some room to the upside.”
Wheat and corn have two separate fundamental pictures, Newsom said.
“We’ve got solid, short-term demand for corn, whereas it’s a relatively new thing coming along in wheat,” he said.
Russia’s impact
Whether stories about Russia limiting February to June wheat shipments to 11 million metric tons prove true would put total export shipments to 44 million metric tons, down from USDA projections of roughly 48 million metric tons, Behne said.
“If the world was going to not reduce its export demand, then there’s 4 million or 5 million tons of wheat that’s got to come from somewhere else potentially,” Behne said.
The market could get some life in it once the Russians make a formal announcement about an export restriction, likely around January, Behne said.
He also pointed to reports that Russian wheat crop conditions are the worst in 10 years, which is as long as they’ve been reporting crop conditions, requiring spring replanting. Wheat futures held their gains as a result, he said.
The best real chance at serious price gains would probably come in the spring, if Russia’s crop really is that poor, Behne said.
“That’s maybe where the real potential lies,” he said.
