As the commodity markets continue to hinge on the outcomes of several global factors, the glass-half-full approach is honing in on corn and what looks to be an upswing, as we look at the December charts.
Slow and steady may win the corn race with consultants staying optimistic that a rebound is on the horizon. With a looming increase, Jim McCormick, co-founder of AgMarket.net, says the question circling the minds of end-users is whether to buy now, or gamble and wait for the seasonal pullback that can ensue with harvest.
He says the price of corn will largely be dictated by yields, and worldwide demand.
“In the long run, if that national yield in the United States and actually comes in at 172, or lower, which is where a lot of the trade guesses are coming in at, your carryout is going to drop to about a billion bushels, maybe 1.1 billion. The reality is, that any lower than that, they’re essentially you’re going to run out of grain and the markets going to have to go into a rationing mode,” explains McCormick.
With dry conditions across North America, China and Europe, he says all eyes are on South America, which too could very well follow suit and end up having a drier than normal season. McCormick says if this is the case, it’s very likely that the corn market will go back to the all time highs into the winter and early spring.
If we see corn prices rebound in such a way, McCormick says generally speaking, it could bode well for other commodities as well stating, “if you get that corn market start shifting up too much, it will start to pull other commodities up.”
While we could see demand outweigh supply in the corn markets, the opposite could prove to be true in the bean market.
McCormick shares that the corn-to-bean ratio usually sits around 2.35 to 2.4, however, as markets dip and dive and as producers start to plan their 2023 crops, we could see those ratios kilter. He says if the corn crop fell to 168 and demand stayed put where it is at today, the carryout would be around 800 million bushels, while the pipeline levels are at approximately 1 billion. In this type of scenario, the corn market would likely go higher to ration out demand, he says.
“On the other hand, if the bean yields continue to creep up and push up to 51 and a half to 52 bushel bean yields and China continues to clamp down on the economy. What’s going to happen is you’re going to start seeing this market make some moves where the corn market will go up the bean market go down where they’re essentially trying to encourage the world producers to say hey, plant more corn don’t plant as many oil seeds don’t plant beans don’t plant canola. So that ratio could get out of line as it tries to encourage people to make some planning decisions into the 2023 potentially,” says McCormick.
Of course, many factors still hang in the balance including the ongoing war between Russia and Ukraine, despite there being some movement, it’s not clear cut whether it will continue and if it does or doesn’t, along with the actual demand from China, will both play significant roles in where commodity prices go in the coming days, weeks and months.