El Nino and La Nina Weigh On Corn Fields Everywhere

If there is one question I get a lot, it’s what will the price of corn do?  Of course, I always laugh that off, as nobody really knows what the price of corn will do.  I leave that to Darin Newsom and Todd Hultman here at DTN.  Yes, from time to time I’ll handle the Ontario side, but at the end of the day generally there’s lots of corn around and at prices where we can produce profitably.  As we get set to careen into what might be the hottest summer, I’m sure that question will come up again.  The price of corn might be in the cross hairs.

Interestingly enough I stumbled upon an article today about Malawi, a small landlocked African country, which had always been a corn exporter until this year.  Simply put, El Nino has caused widespread drought in that part of Africa over the last couple of years and corn output has been slashed and of course people are in the balance.  In the Third World where food is much closer to you, drought can be devastating.  Malawi is looking to import about 1 MMTs of white corn for its 17 million people and is in negotiations with several countries to import yellow corn.  Of course, corn prices are high in that part of the world and infrastructure to import such amounts is difficult.  There are no Y-Drop nitrogen applicators or auto steer in that part of the world.

I have never been to Africa and I do not know if I will ever get that opportunity.  However, I have studied with many African students from Zimbabwe, Zambia, Kenya, Ghana, Nigeria, Ethiopia and Libya.  They have all told me about the different challenges with regard to agricultural production.  I remember very clearly in an advanced farm management class in grad school talking about the nuances of obtaining seed corn.  I told my fellow African students that we needed to order so much seed corn and we could take back what we didn’t use.  They both looked at me and were exasperated.  They told me they would be lucky to get seed corn delivered and they would never ever be in a position to return a product so valuable.  That was my partial initiation into Third World corn production.

Of course, it is so different here.  Tomorrow we will have the June USDA report.  Of course, the real fireworks will be on June 30th when we will find out if our American friends planted 93.6 million acres of corn.  There may be a shift of production from corn to soybeans, but as of now we are still expecting a crop north of 14 billion bushels this year.  My gosh, that’s huge; you would think there would be enough for Malawi.

I hope so, but of course as farmers here in North America we really don’t think about that.  Demand can be such an opaque thing.  We commonly refer to corn demand as ethanol, feed and seed and residual.  We don’t think about the empty stomachs back in Malawi.  We think more about the weather and whether 2016 will be anything like 2012 or just a carbon copy of 2015.  The price and income optics are in the balance.  $4.26 nearby corn futures Thursday is nothing to sneeze about, especially after the price valley we’ve been in for months.  $5 corn off the combine this fall is real in Ontario.

So what will the price of corn be in the future?  Much will depend on the weather over the next six weeks and that is something that I leave to my DTN colleague Bryce Anderson.  If you listen to Bryce’s reports you will get all kinds of information about short-term and long-term weather forecasts and how that might affect production areas around the world.  At one time in my career, I thought that was all noise, but I’ve since recanted.  Weather phenomenon like El Niño and La Nina are extremely relevant and affect different areas of the world consistently.  Malawi is an example of that and the wet conditions for harvest in Argentina are another.  So as we move ahead in our production season the changeover to La Nina will surely have an effect on the price of corn.

It will still leave some empty stomachs in Malawi, not good.  The answer of course is about basis, that value which determines when grain is moved.  Getting it to Malawi will be costly, but maybe the changeover to La Nina will bring better luck to Malawi production fields.  However, here in North America, let’s hope its kind.  Soybean prices have been insane; don’t know if it spreads to corn.  I thought the world was awash in grain.  With temperatures rising in farm country, how much corn we’ll have to divide up will soon be determined.