Inside the Market

In the February issue, I talked about the bearish influence winter can have on commodity prices. In the case of corn, it was especially true this past winter, as the darker days followed a record U.S. harvest of 15.34 billion bushels (bb) and a return of U.S. ending stocks to levels above 2 bb. Combined with early expectations for big, upcoming harvests from Brazil and Argentina, the winter months were inundated with bearish expectations that kept potential buyers out of the market. Almost on cue, December 2024 corn hit a low of $4.46 on Feb. 26, 2024, the lowest December price in three years.

Since then, the winter curse has lifted. USDA's ending stocks estimate is still large, 2.12 bb at the time of this writing, but the South American season hasn't been as ideal as earlier anticipated. USDA holds to an optimistic 124.0 mmt (4.88 bb) corn production estimate for Brazil in 2023-24, while Brazil's crop agency, Conab, estimates production at 111.0 mmt (4.37 bb). Given Brazil's adverse weather and the weight of other private estimates, Conab's lower estimate looks like the more credible choice.

STRONG DEMAND

A consistent performance of U.S. demand for corn is the other factor helping corn prices rise since winter. Thanks to active feed demand, ethanol production and export sales, USDA's March 1 "Grain Stocks" report showed 8.347 bb of corn on hand, confirming corn demand in the first half of 2023-24 was 710 mb higher than the same period a year ago. U.S. corn exports are currently up 34% from a year ago, and the U.S. has a good chance at becoming the world's top exporter again in 2023-24, one year after losing the crown to Brazil.

The most surprising indicator of strong corn demand in early 2024 is how the basis has steadily improved since harvest. Normally, basis strengthens after harvest and then levels out sometime after January. In 2024, the national corn basis, calculated from DTN's National Corn Index, has continued to strengthen and is now 15 cents below the May futures contract, the third strongest showing in 10 years for late April. A look at DTN's basis map shows above-average readings in Iowa, where ethanol demand has been active, and last year's production may not have been as generous as USDA's 2.52 bb estimate for the state. Other areas of strong corn basis are showing up in western areas of heavy livestock demand, where crops were also scorched by a stretch of hot and dry weather in the fall.

ROOM FOR OPTIMISM?

As of late April, December corn prices have improved from the February low of $4.46 to $4.73, and the next big influence will come from the U.S. corn crop, a new season that is expecting the return of La Nina conditions (see DTN Meteorologist John Baranick's summer weather outlook, on page 12).

Thankfully for producers, the worst of winter's pessimism is behind us, and for the moment, the uncertainty of a new season offers some hope for better prices ahead. Seasonally speaking, the highest corn prices vary each year but tend to occur near early June.

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-- You may email Todd at todd.hultman@dtn.com, or call 402-255-8489.

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