Where's the Corn?

When my children were growing up, a popular book was "Where the Wild Things Are," by Maurice Sendak. It's about a boy named Max imagining an adventure with scary wild animals, and his mastery over them in various situations, tied into his situation at home in the real world. The corn market saw some pretty scary things Friday, with June 1 stocks on the high side of expectations and more corn acres planted than were seen in the March intentions (or in most pre-report estimates).

Some producers we talk to in the Western Corn Belt (WCB) think those corn monsters are imaginary, that the old-crop bushels aren't really there, and hope to wake up from the dream post haste! One reason for that opinion is that we have seen some very aggressive basis bids in the WCB this past week, even +80 July. That seems to suggest a lack of corn and doesn't match up with the U.S.-level narrative. On top of that, regional production in 2023 was up from 2022's seriously drought-impaired crop, but still down from 2021.

Let's dive into the corn stocks numbers a little deeper and find out where the corn is.

First, a little background. USDA put June 1 corn stocks at 4.993 billion bushels (bb) as of June 1, although survey data was accepted up until June 18. That was 890 million bushels (mb) larger than June 1, 2023. The figure was above trade estimates and encouraged the bears to press their advantage in July futures all the way into the delivery period. If there is a bit of good news in the numbers, it is that low prices are curing low prices. On Dec. 1, corn stocks were 1.358 bb larger than a year ago, and now they are only 890 mb larger. We're drawing down the pile faster.

But where is the pile? If the Western market can't see it, there are basically three choices: 1) It doesn't exist; 2) With the percent held off-farm higher, it might be hidden away in grain bins while the more visible commercial piles have been picked up; or 3) It is elsewhere.

Well, 2.278 billion of those bushels were in the five states we define as the Western Corn Belt (Iowa, Nebraska, Minnesota, Missouri, Kansas). That's 45.6% of the U.S. total, but down from 48.3% a year ago. So, the corn must be elsewhere. It is also not evenly distributed by state within the region, with Iowa stocks 12% higher than last year, while Nebraska is up only 5% and Kansas 6%. Missouri stocks are up 40%.

Our traditional definition of the Eastern Corn Belt (ECB) is east of the Mississippi River, i.e., Illinois, Indiana and Ohio. If you remember back to January, Ohio had an all-time record crop in 2023, and the other two were the largest since 2014. That might tend to cause a stocks buildup, and, in fact, ECB corn stocks are 32.5% larger than a year ago. Illinois is the biggest problem, with USDA indicating corn stocks there were 43.6% larger on June 1 than a year ago. Complicating the problem, on-farm stocks in Illinois were 71.2% larger.

Why the regional disparity? Is it all production? No. I blame a lot of it on exports. U.S. corn exports have picked up nicely this year, thanks to lower prices and some lost production in South America. Old-crop corn export commitments are 38% larger than last year, as of June 20. Exports since Sept. 1 are up 26%.

The devil is in the details. Mexico has shipped 17.447 million metric tons (mmt) of purchases out of 43.285 mmt through June 20 in the FAS report. That's 40.3% market share. In last year's smaller program, they had 36% market share at this time. Why is this significant? Most of their corn is going there by rail, and a major portion of it comes from the WCB. The ECB states ship primarily to the Gulf and the Southeast. Gulf shipments were very slow for months, due to low water levels on the Panama Canal and limits on vessel traffic. Thus, there are relatively tighter supplies in the West than in the East, and some hot basis bids in areas that have been drained of corn.

Alan Brugler may be contacted at alanb@bruglermktg.com

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