It can be really frustrating to struggle through a planting season or watch a beautiful crop get mowed down by a July hailstorm without much notice from the corn or soybean markets. When traders ignore destruction in the rearview mirror, and focus only on what is ahead, frustrations intensify.
December corn at $4 (or just above) coming out of Independence Day reflected expectations of a national average corn yield of 183 bu. to 185 bu. per acre — above the trend-line yield of 181 bu. per acre. The market was split on if that was possible in early July, but it clearly sided with those expecting a “big yield.” Big-yield expectations are normally difficult to match, especially when an expected corn yield would beat the record by about 6 bu. per acre. When matching a record yield would be “worse than expected” and price-friendly, it makes sense to wait for more supply-side information before adding to sales.
But that does not erase the need to sell price strength. If you are waiting for a rally before making more sales, you’ve got to sell when prices do rally.
- A national average yield at the trend line of 181 bu. per acre would cut supplies by nearly 170 million bushels from midsummer expectations. That would slow downside momentum in corn prices, but it would not be likely to trigger a significant price recovery.
- A national average yield that matches last year’s record of 177.3 bu. per acre would cut supplies roughly 475 million bushels from the midsummer expectations. That would drop 2024/25 corn carryover expectations to under 2 billion bushels, and likely open upside potential to at least $4.50 in December futures.
Mixed Message from Market
USDA’s June Quarterly Grain Stocks Report (released June 28) confirmed something analysts on “AgriTalk” cited all winter and spring: Farmers held a higher-than-normal amount of old-crop corn in the bin. Many said it’s why spring corn prices were about a dollar below last fall.
Big on-farm stocks encourage a bear spread market — nearby futures at a discount to back month futures. That was the case the day the stocks data was released; July corn was at a dime discount to September futures. That discount had been erased by July 8, and July corn was at a slight premium to September futures, an indication that old-crop supplies were “tighter” than indicated in USDA’s stocks data.
This mixed message from futures will be managed by basis and the cash market. Big on-farm stocks normally weigh on basis, and corn basis traded below the three-year average in the first half of 2024. That’s likely to continue up to the 2024 harvest. Use short-term basis strength (a “push”) to make cash sales and consider reopening upside price potential with a call option as markets sort out the mixed signals from futures.
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