Those who had old crop corn on hand coming out of the winter were hopeful for a big rally this summer. Many felt the USDA was too high on the 2019 crop in their final estimate and knew there was a ton of corn still in the field in the Dakotas. Throw in low test-weight discussions as well as strong ethanol demand (at the time) and the only big question mark for cash holders was whether we’d see exports ramp up.
One only had to think back to the summer of 2019 to see how big of a payoff some producers were blessed with by being patient. During the rally due to excessively wet conditions last spring, cash corn prices soared, with some producers in my part of the world receiving $5 for corn. With my closest terminal in central Illinois bidding $4.01 at 16 over the May on March 4, the cash holder was feeling good about their situation…especially given the ‘push’ over posted bid we were hearing from the producers our company works with.
Fast-forward just two weeks and the cash price had dropped to $3.40 with a bid a nickel over. With the low in my area printed on April 21 at $3.09 and a nickel under the May, we’d lost almost a dollar from cash prices with 20 cents attributed to basis while the remainder came via the CME.
It goes without saying 2020 makes 2019 look like a walk in the park. When states issued stay-at-home orders due to the COVID-19 pandemic, demand for gas plummeted. With a massive build-up for oil, gas and ethanol stocks, energy prices took a nosedive, with the pinnacle seeing May crude trade sharply into negative territory just before going off the board. Just over a month ago, corn grind for ethanol hit its low of 53 million bushels. It seemed as though the demand destruction could continue for some time.
Fast-forward a month, and it seems like so much has changed. Some states started opening up partially and many people were ready to get out of the house, driving up gasoline demand. A steady rebound has ensued with corn grind for ethanol, with the latest report showing ethanol production up more than 9% in a week while stocks were down a shade less than2%. We’re grinding more than 21 million bushels more per week than we were at the low. With export demand impressive at times versus expectations, it appears some bargain hunting has made its way to the market.
It’s no surprise we’ve seen cash prices stabilize. My local end-user bumped their bid back up to a nickel over the July and currently show a cash price of $3.30. While that’s no home-run, at least we’ve seen a 20+ cent bounce off the lows. Additionally, I’d highlight what many of our clients are telling us at AgMarket . . . they’re getting a push from their grain originators. This is the first time we’ve heard of pushes to any degree in about three months. Do we look for cash prices to continue to rebound? While we’re at a time seasonally where we can see a rally, we’re going to need solid demand to pave the way. Producers might be wise to place offers, keeping in mind the time is coming these bushels are going to need to find their way to town. While we stabilized the situation for the time being, let’s be cautious rather than get too greedy on these old bushels.