Market Commentary for 7/5/24
The corn market was in a holding patten this week. The market is stuck between not knowing what weather will be like later this month and knowing a lot of old crop is being stored by farmers.
Where Will Prices Go from Here?
Historically, corn prices go down over the summer unless there are widespread drought conditions, which is rare. As I shared previously, in 11 of the last 15 years, the value of December corn in late November was lower than ANY value traded in the previous May or June.
Of the 4 years when the market went higher after June, in 2 years the planted acres decreased from the March intentions report to the June report. In the other 2 years, there was widespread drought conditions throughout the US.
In reviewing corn prices over the last 15 years, there are three years that look most like 2024 at this point:
In each of these years, US stocks had increased from the previous year and prices decreased over time. In 2009 and 2014 a new record national yield that was above trendline was hit, and in 2013 the national yield was only 2% below trendline.
So far, the low for 2024 was on June 28th when December corn was about $4.20. Based on a historical perspective, it is most likely corn prices will continue to go down until and possibly through harvest without a big weather event.
Weather
Forecasts for the most critical weather window become clearer after this weekend. With the number of acres planted and widespread timely rains so far this year, it seems likely the final national yield will be near trendline and there is a chance it could even be higher.
Old Crop Becomes an Anchor
The biggest obstacle for December corn prices is the amount of unpriced old crop still in storage. I suspect farmers with grain still in the bin will move most of their remaining 2023 crop over the next 60 days. I think the selling will start slowly, and if weather remains normal over the next two weeks, this pace will increase as August approaches. This could lead to lower prices over the next two months.
What About the Flooding?
There has been a lot of talk of flooding and lost acres. Only about 10% of the corn belt has been hit with heavy rains. While some low-lying acres in those areas have been lost, it is nowhere close to all of them.
If 10% of the areas with heavy rain have been lost, which I think is a stretch, that is only 1% of the total planted crop or around 900,000 acres. Some areas that received 8” or more of rain last month could have nitrogen loss, which would be like having yields that experienced mild drought conditions.
However, timely rains throughout the rest of the US can easily make up for any losses in the areas experiencing too much precipitation and would contribute to an increased national yield.
But The Funds Are Really Short
Yes, they are. However, farmers are way behind on sales, so the two can offset each other.
Bottomline
Farmers that are behind on old crop and new crop sales are facing an uphill battle. So far, forecasts are suggesting normal July weather, with widespread drought conditions becoming less and less likely. Until the old crop has been sold and shipped, it seems unlikely the lows are in yet for the year.
Want to read more by Jon Scheve?
Corn Will Probably Struggle To Rally Moving Forward
Understanding Why I Like Margin Calls
Why I Prefer Using Futures Instead of HTAs
How Many Acres of Corn Will Be Planted This Year?
How Much Prevent Plant Will Be Taken This Year?
