The corn market looked like it was going to give Upper Midwest producers a cash corn price of $4 per bushel in mid-December, but then prices backed off leaving corn farmers without that price.
Farmers were waiting to see if traders would hang up their vests and leave the trading floor for a long holiday, or if the market would stay active during the last two weeks of December.
Farmers felt the sting of a large basis with cash prices on Dec. 17 ranging from $3.51 per bushel (basis 57 cents under) in western Minnesota, to $3.33 per bushel (basis 75 cents under) in central North Dakota, and $3.78 per bushel (basis 30 cents under) in Davenport, Iowa.
The CME Group March corn future contract traded at a low of $3.30 back in October, and slowly worked up to about $4.12 per bushel, before closing at $4.08 on Dec. 17.
“These markets have been so topsy-turvy over the last 20-30 days,” said Mike Krueger, president of The Money Farm, West Fargo, N.D.
On Dec. 17, the wheat market was “leading the charge,” because of Russia’s currency challenges, the lower price of crude, and the restrictions on wheat exports.
“In the case of corn, we are also waiting to see if we finally get confirmation that China has officially approved the banned GMO-variety – that has stopped U.S. exports of corn to China for a year, and have threatened DDGs (ddried distillers grain) exports,” he added.
The situation with China purchasing U.S. corn is likely a combination of real demand plus political concerns. China announced an increase in tariff rate quotas (TRQ) for wheat and corn, and there were rumors that several vessels were lined up to haul U.S. DDGs there early in 2015.
The demand for corn by China was higher than traders expected, Krueger said.
“Just because they announced a TRQ doesn’t mean they are going to import that much, but it was interesting to see they had a higher number than people expected,” he said.
There were also rumors that perhaps 30-40 million tons (1.18-1.57 billion bushels) of China’s corn spoiled. In addition, Ukraine has talked about defaulting on some of their corn export shipments to China.
“If you listen to all of that background noise, it would lead you to believe that China is getting into the position to at least import some U.S. corn over the next six to 12 months,” he said. “With all of the things going on in the background, I’m not so sure that we’ll drift into slow holiday market doldrums.”
On Dec. 17, the May corn future traded at $4.17, while July traded at $4.24, September traded at $4.25, and December traded at $4.32 per bushel.
Compared with prices in early December, March was 13 cents higher, May was 16.5 cents higher, July was 16 cents higher, September was 13 cents higher, and December was 11 cents higher.
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