Prices have not looked good over the past two weeks with corn making new contract lows on Tuesday. Traders shored up their positions before they left for Christmas break and many of them will not return until after the new year. Farmer selling is sparse as producers balance their books before they roll into a new tax year. This low volume and lack of interest results in increased price volatility.
China is petitioning for no dumping on distiller grains in order to use up domestic supply of out-of-condition corn. Trade is still trying to determine what will happen if China actually halts imports of DDGs. Legal proceedings will most likely bring a halt to this in the future but it is doubtful that the US will see any benefit from this as our corn is still overpriced compared to South America.
El Nino is considered to have peaked and is on its way to either La Nina or neutral status. A weak to strong El Nino is expected into the spring and could result in average to above average yields. Some traders are already predicting a larger corn crop than what is currently being estimated. Meanwhile, Mississippi freight is shut down due to flooding, and severe winter storms are impacting the Southwest.
If world demand doesn’t rise, the strong dollar may result in higher carryout and the US being the reserve holder for corn until it is needed. Foreign currency weakness is also to blame for the lack of foreign demand for US commodities. Any strengthening in foreign currency values would be just as supportive to our market as a devaluation of the US dollar. Corn exports are 15% behind the pace needed to reach the USDA projected total.
Cattle prices rallied after a surprising cattle on feed report on December 18th and continued as winter storm Goliath hammered the southwest US. An estimated 20,000 head of dairy cattle, ranging from small calves to cows, were lost as snow and ice drifted 15-20 feet deep. A cheese plant reported that they only received 10% of their normal milk deliveries on Monday. Cows that can’t be milk will show reduced production for months to come. Goliath is being compared to winter storm Atlas that occurred in South Dakota a couple years ago. Many of us were not affected by this storm but to many it will always be known as the winter of 2015.