Last winter we watched the South American soybean crop and the Argentine corn crop shrink to unexpectedly low levels. The smaller-than-expected global soybean supply helped launch a $3.50-plus rally in U.S. soybean futures from mid-December 2011 to early May 2012. It took a long time for the bean market to fully realize how much supply had been lost to the 2011-12 South American drought.
Price action in U.S. corn futures during the Argentine drought was much different. Lower (and lower) crop estimates from Argentina were one reason U.S. corn prices traded at or just under $6.00 from mid-December until late March.
Once U.S. markets decided the South American corn and soybean crops stopped getting smaller, the spring rallies ended.
That’s where we’re at with the U.S. crops and markets —
Once the markets are “confident” the U.S. corn and soybean crops have stopped getting smaller, we’ll likely see the high in prices. And that may have already happened. We’re not saying the crops are getting bigger — they just have to stop getting smaller to put in price tops.