MARION, Iowa, January 14 – The USDA Report last Friday, showed a smaller corn crop than the trade was expecting. The market gained 20¢ and held at the new plateau on Monday. The reduced USDA numbers confounded the grain trade, but not the farmers.
“Prices had fallen so far that it just didn’t make sense from the farmer standpoint to be a seller,” says Market Analyst Rich Balvanz with AMS Commodities in Marion, Iowa. “Whether that was a right or wrong decision at the time, prices have gotten down to below production cost levels for many producers, and they simply did not have a desire to throw in the towel at this point, when we still have acreage issues for the coming season, along with a crop growing season to deal with.”
Farmers have built millions of bushels’ worth of on-farm grain storage. Balvanz thinks that investment will temper the movement of the market:
“Because of less grain that is held in commercial storage, and particularly in ownership of commercial operators, that gives the farmer a much stronger lever in marketing, and I think we’ll see that reflected in cash basis levels this season, particularly in Iowa, where the crop was shorter relative to other parts of the country. We have a much stronger cash basis, especially on corn.”
But has this corn price recovery changed the mindset on planting for this spring? Balvanz says no.
“At this point, I would not think that we’ve changed anyone’s opinions on the relative profitability of corn versus soybeans, at this stage of the game.”
Carryover stocks of corn are still large and South America begins harvesting a projected record crop in the next two months, and while no one is projecting $5 corn for the remainder of this year, farmers are hoping, and there are 350 days left.