Higher ending stocks pressure price

PEORIA, Ill. — The 2023-2024 marketing year corn outlook hinges on two factors that sway the supply and demand balance sheet — Brazil’s safrinha and ethanol production.

“My best guess for the year ahead is on the low end of the spot futures corn chart. I think there’s a chance of $4.25 per bushel for corn and we may be threatening that fairly soon,” said Todd Hultman, DTN lead analyst.

“I was disappointed that we never really had a post-harvest rally this year the way we normally do, and when we hit a new low Nov. 27, I actually put out a sell. We had already forward sold 50% of our corn crop earlier in the year at the higher price levels before corn sold off and then added a third sale on Nov. 27 because I feel like we’re being forced into the risk of much lower prices.

“Because right now we have a lot of corn supply here in the U.S., Brazil is a big question mark, but it’s hard to have any confidence or high probability chance that Brazil is going to have some big weather problem. So, I’m concerned about the next few months on the low end of the corn price.

“On the top end for 2023-2024 I have $5.50 per bushel. What would do that? If we get to the safrinha corn crop planted in February and they’re coming up short on soil moisture in Brazil.

“That’s the bottom line, and sometimes they can have a risk of frost late in their corn season, but having soil moisture is the main risk for the safrinha crop. It’s a possibility, but it’s tough to count on that one and it’s still a few months ahead.”

Ethanol

Ethanol margins remain a positive source for corn demand.

Driving that demand is corn’s processing value — combined value of ethanol, distiller’s dried grains with solubles, and corn oil — which results in a value, for example, of $7.23 per bushel of corn after the ethanol company purchased corn at $4.53 per bushel at the time.

“That’s a very nice, wide, comfortable margin and a lot of encouragement there for ethanol plants to continue to buy and process corn. The ethanol market remains a good, solid source of demand for corn,” said Hultman at the Greater Peoria Farm Show.

Supplies

Marketing year-ending stocks are projected at 2.16 billion bushels, the highest in five years, including about 1.5 billion bushels each of the previous three years.

“That obviously brings corn back down from $6 a bushel to now we’re under $5 per bushel,” Hultman said.

According to the U.S. Department of Agriculture, the average cost of corn production nationwide is nearly $870 per acre. Using the national yield estimate, that puts the cost of production at around $5 per bushel.

“In Illinois where the yield averages 200-plus bushels, the cost of production probably isn’t going to be near as high as $5 a bushel. It’s really nice to have that extra yield, but that’s the type of market we’re working with this year, much different than what we’ve seen the past two years,” Hultman said.

Market

As part of trying to understand the corn market, the analyst monitors China’s Dalian Commodity Exchange and Brazil’s Bovespa stock exchange.

“I look at the July corn on the Dalian to see if there’s signs they need corn or not. In the current situation they’re trading near their low for the year, but keep in mind the current price of corn in China works out to be equivalent of $9 per bushel here in the U.S.,” Hultman said.

“So, in my mind, even though they had a big crop, they had a good year of production in China, they still need to be a buyer of corn. The only question is will they buy it from us or Brazil. The good news is right now we’re a cheaper provider of corn than Brazil is.”

July corn prices in the Bovespa stock exchange jumped in November and were about $6 a bushel in late November for Brazil’s new crop.

“That will be reflective of the safrinha or the second corn crop, which is the largest corn crop that they grow in Brazil. It’s roughly 75% of their production of corn and gets planted around February and harvested in July,” Hultman said.

“We’re still a few months away from that crop being planted, but already we have weather concerns about that crop. There are projections the rainfall will be below normal in Brazil.”

When the soybean crop is harvested in late January and February, Brazil plants the safrinha corn crop.

“If the soil moisture is less than normal for that corn crop, it really makes them vulnerable to problems for their corn season, because in early May their rainy season transitions to a dry season typically. So, they really count on that built-up soil moisture to get them through that period,” Hultman said.

“They’re only shooting for 90-bushel yields, so their expectations are not high, but they really need that moisture in the beginning to help them get through. So, I would say the safrinha corn crop is up in the air this year. What happens with December weather in Brazil will play a large part in this whole puzzle.”

Exports

Corn exports are up 31% from a year ago in the early months of the new marketing year.

“That’s not saying a lot to be honest because our corn exports started off at a poor pace last year. We didn’t have a lot of corn available and Brazil was beating us on the price at this point in the season. That’s no longer true. Now we’re very cheap again and we’re beating Brazil on the price currently,” Hultman said.

“We’re not quite up to the four-year average of what we would normally have for corn exports, but we’re just a little below the average and better than a year ago.”

Shipping concerns remain due to low water levels on the Mississippi River and at the Panama Canal.

“So far, the Panama Canal low water has not been a material issue because a lot of our corn has been sold to Mexico, but moving forward we’d like to get those sales to China and we can’t do that without the Panama Canal other than the corn we have going through the Pacific Northwest. I think it’ll cost our sales this year,” Hultman said.