Commentary
March corn futures ended 2022 at the second highest year-end quote on record, (6.78 basis March 23 futures) reflecting tight supplies in my opinion. But demand concerns are growing as sales for future shipment lag the USDA estimate by 280 million bushels or 14 percent. Last week brought fresh news of feeble ethanol demand from the fuel sector, while the latest USDA export sales data indicated persistent weakness. Meanwhile, reduced livestock herds are potentially consuming less feed, whereas the latest broiler numbers rose 1% annually and dairy cow numbers are inching upward. Few changes to the corn crop are expected in the Jan. 12 USDA Crop Production Report, but the quarterly Grain Stocks Report could surprise the market. The flip side and unknown in the market, are the growing conditions for corn and beans in South America. Persistent drought remains in # 3 World exporter Argentina, where the corn is only 70 percent planted versus a three-year average at 84 percent. The good to excellent category for the corn in the ground is just 13 percent good to excellent. Beans in Argentina according to the Buenos Aires Grain Exchange, are 82% planted versus a 3-year average of 91%. The good to excellent category for Argentinean beans is just 8% percent good to excellent this year. Last year at this time the good to excellent was 48 percent. Brazilian corn is not in the ground yet as it safrinha corn crop is planted after their bean crop is harvested. The safrinha corn crop represents 2/3rds of Brazilian corn production and the majority of their exports. Despite a 36 hour cease fire in Ukraine, the war could ignite again with future export corn exports put in jeopardy. In short, we could see the funds bull spread this market until US planting and growing season becomes a known. That won’t be a known most likely until mid-July. There is ample time for exports to pick up, but until they do, I wouldn’t anticipate the USDA lowering corn’s ending stocks on the balance sheet from a demand standpoint. Instead, watch the on-farm stocks number. There always seem to be bushels lost and found from prior crop seasons, that alter the balance sheet and possibly create report day surprises. I will have pre -report guesstimates on next week’s report with a post report recap on next Thursday afternoons webinar.
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