Corn and soybean prices finally made a turnaround on Friday, but for a week straight, it seemed prices were in a free-fall. New crop corn prices fell below $4.
Even with a few daily export sales, the markets seemed unfazed by the news. Mike North of ever.ag says the main reason for the price pressure is the amount of grain still in farmers’ hands.
“I think you don’t have to look much further back than the quarterly grain stocks report,” says North. “The reality is on farm stocks are massive. We’re getting to that time of the year when ultimately guys are preparing for the coming crop. They’re cleaning bins out. And we just had a little rally in this market, that incentivized movement, and so a lot of grain came to town.”
He says farmer selling combined with rain coming through parts of the Corn Belt, were enough to push prices even lower.
“That put pressure on key technical numbers in the market, namely $4,” North adds. “And as we broke through that Wednesday, it just provided a little bit more momentum to the downside for the time being.”
What does the trade currently have priced in as far as yield? Mark Gold of StoneX Group says the current expectation is for a record crop.
“Well, I think the the experts out here have budgeted in a 183 [bu. per acre] to 184 [bu. per acre] corn crop [yield]. Are we going to get that? I don’t think so. I think there’s too many holes in the crop, whether it’s North Carolina, Kansas, Nebraska, eastern Iowa,” says Gold.
He points out there’s been a lot of problems in area that are facing drought or other weather issues like hail. But he admits for the majority of the Corn Belt, the crop looks big.
“Big crops get bigger,” says Gold. “And I think the market has already budgeted all this in. Plus, you look at the massive funds and the short position. They’re short 350,000 corn, more than 200,000 beans. That’s 550,000 contracts between just the two of them, let alone add in the meal oil and, in the wheat. They’re massive, short positions.”
As prices made a turn higher on Friday, the question is, “Are prices too low?” That’s what we asked Gold.
“You tell me. You tell me when the American farmer has gotten out of those old crop positions,” says Gold. “I’ve always said the markets won’t rally until the farmer is out of the grain. They started the year with record crops in the bin. They’ve been coming out of it in the last 30 days, but I still think there’s more yet to come. I think we’re starting to slow this downside momentum, but it’s been a rough July.”
The silver lining is the fact lower prices have sparked more export interest. On Friday, USDA reported a daily sale of 202,000 metric tons, or 7.42 million bushels, of soybeans to China. Gold and North discuss the recent export news in the U.S. Farm Report marketing roundtables this weekend.
