It’s rare when there is widespread agreement among marketing advisers on how an individual crop should be handled. If it was common, market outlook “debates” would be non-existent. That’s what makes me nervous about postharvest marketing strategies for the 2023 corn and soybean crops. Market advisers, including myself, seem to be stacked on one side of the canoe; I’m not sure what’s stopping it from capsizing.
A generally poor finish for both corn and soybeans has made the supply side of both balance sheets a moving target until the final production estimates come in January.
Sell Soybeans Now
Still, soybean fundamentals are more positive than the supply and demand outlook for corn. Soybean export demand improved as the 2023/24 marketing year started, and expanded crush capacity helped domestic demand set new records late in the old-crop marketing year.
That soybean demand makes the soybean market more receptive to a postharvest rally if production estimates trend lower into January. Soybean futures are incentivizing selling soybeans now rather than sometime in 2024. Selling soybeans “off the combine” is a consensus plan among market advisers, but only if growers are willing to maintain pricing flexibility. That means using call options to participate in a potential postharvest rally.
Sell Corn Later
Corn demand struggled at the start of the marketing year. Exports are behind last year’s pace, and the availability of Brazil’s corn continues to pull importers south of the equator. Feed use faces a headwind, but as corn-for-feed prices retreat under the weight of new-crop supplies, it should hold steady. Corn-for-ethanol use is solid, but it does not have the growth potential to offset lost export demand.
The supply-side of the corn balance sheet is a moving target for two reasons. Late-season stress threatened yield potential, but many expected USDA to add to planted and harvested acres in this fall’s production reports. It creates a nightmare scenario for corn bulls. The potential is that more acres offset lower yields, and if export demand is trimmed further, 2023/24 corn carryover could remain at 2.2 billion bushels or more.
Carry in corn futures is giving incentive to put it in the bin until delivery in the first half of 2024. At the same time, rail bids went to a new-crop cash bid on Sept. 1. That essentially makes all corn “new crop” and is likely to build more carry into futures — giving more incentive to store now and sell later.
If December corn futures fall under the weight of harvest and a lack of export demand, capture back-month premiums with forward contracts, put options or hedges. Be ready to lock in a crop insurance indemnity below $4.50 by mid-October.
