Last year, Michigan had an exportable corn surplus of approximately 100 million bushels. With production problems and weather, that current number is around 58 million in exportable corn—slashed by a little less than half.
According to Mark Talaski of Advance Trading, Inc., the domestic markets are having to pay more to keep corn home because that exportable corn still has a market, which could mean you could be spending more or selling for higher, depending on which side of the equation you’re on.
“Michigan could totally sell it, but if they do, it’s going to be at a premium because there’s local demand for that, so that’s inflated some of the domestic market,” said Talaski. “It’s added a premium over probably a year ago and basis levels. But flat price-wise, prices haven’t changed much from a year ago, but basis has for sure, so the net number is probably a little higher.”
That premium could stick around into the spring and part of the summer, Talaski says. Mostly because of quality issues.
“A lot of this corn came off the field much wetter than it normally does, and there’s a lot of concern about low test weight, higher damage, the storability of this crop is a concern too,” he said.
Earlier this month, the U.S. and China signed the Phase One trade agreement, where China pledges to purchase $40 to $50 billion in ag products each year. So far, there haven’t been any major purchases from China. Talaski says we need to be patient.
“You’ve got to give it a couple weeks, maybe even a month, and then if we don’t start to see those purchases develop, then you got to start asking some questions,” said Talaski. “Nowhere does it say China needs to buy beans and buy them when it’s most expensive. Truthfully, they can make most of their purchases in the new crop in the September forward slot this calendar year, and still be within the obligations they’re required to do.”
There are a few storylines Talaski is watching as 2020 develops, including the 2020 presidential election and the rest of the crops in the Northern Hemisphere. He’s also keeping an eye on the corn to soybean ratio. He expects that to be a big driver as soybeans try to compete for corn acres.
“It will be interesting to see—I feel like it could be a very ho-hum environment, but we still have the seed in the bag, so we still got to plant it, grow it and harvest it,” he said. “We got a ways to go to guarantee ourselves another trendline yield. A lot of variability is still ahead of us.”