Farmers in the American Midwest still haven't completed their corn harvest. Meanwhile, something special is happening. Because of the erratic harvest, after an extreme season, maize is transported from one coast to the other.
The American grain market calls this 'Chicago' trading. Normally, grain corn is shipped from the northern United States to the south and then exported from that region. The transport routes are also organized in this way. From west to east is not necessarily unique, but it remains special.
Higher prices locally
The reason for this is the split growing and harvesting season. The western Midwest has been able to sow and harvest earlier on average. In the eastern part, the harvest is far from ready, creating a demand for raw materials in that region. Prices in the East are above Chicago futures.
The feed mills and ethanol producers are asking for corn, because many arable farmers in the east cannot or do not want to supply. Farmers in the Midwest are reluctant to sell. This is partly due to the state support provided by US President Donald Trump. An amount of $28 billion has been released to compensate arable farmers for the effects of the trade war with China.
Price doesn't agree
Corn growers are currently being offered a price of $3,50 per bushel for their product. This converts to €7,96 per 100 kilos. The CBoT stands at $3,68 per bushel. That is also why very little trade is conducted. A good harvest in Brazil and the better than expected harvest in the Midwest are not helping sentiment.
Archer-Daniels-Midland Co., one of the world's largest grain traders, expects arable farmers to start selling their product in early 2020. This is necessary to empty the silos so that a new harvest can be stored. ADM expects corn acreage in the United States to increase next year.
Declining stock
The International Grains Council (IGC) expects a decline in global corn supplies for the third year in a row. Consumption is estimated to be approximately 4 million tons higher, especially for corn. World trade is estimated to be 0,8 million tons higher, with more corn being traded in particular.
By the end of November, more than 75% of the grain corn in the United States had been harvested. The 5-year average is 92%, which means that this harvest is extremely late. Market insiders are trying to estimate how many hectares will not be harvested. The last sown and poor plots have yet to be harvested, casting doubt on the high yield figures of the USDA agriculture ministry. A correction is therefore expected in January.
Thanksgiving
Meanwhile, US fuel prices hit a 2-month high just before Thanksgiving (November 28). This is one of the busiest times of the year on the road. The country's refineries produced significantly less fuel in October, causing local supply problems. Ethanol supplies, extracted from corn, are at their lowest level in 2 years. Of the total harvest, 40% goes to the ethanol industry, which means that a tight fuel market is positive for the corn price.