Commodity prices turned lower to end the week after an impressive run-up in prices following USDA’s June Grain Stocks and Acreage reports. The pullback from the highs is one market analysts say should still cause growers to consider managing risk, as the global soybean situation is one with adequate supplies.
“I think based on the weather that we’ve dealt with, and May June, and looking ahead into July, to me, the bean crop has maybe a higher potential of reaching trend or above trend yields compared to corn,” says Brian Splitt of AgMarket.net. “I think it’s pretty well solidified that the corn crop is not going to attain a trendline yield.”
The next opportunity for USDA to adjust its corn yield forecast is next week during the July WASDE report. Currently, USDA has penciled in a 181.5 bu. per acre national yield, but Splitt says most assume that yield is too far-fetched.
“Most of the estimates I’m hearing are in the low to mid 170s, maybe 172 to 174 bushels per acre on corn,” says Splitt. “But I think soybeans still have that potential to reach trend or higher.”
2023 is Unique
The yield debate is one that always gains steam this type of year, and as Tommy Grisafi of Advance Trading points out, weather is always a challenge during the growing season.
“I can’t remember a year where everything was perfect, and I can’t remember a year where everything was just like some other analog year,” says Grisafi. “I know everyone’s trying to compare this 2012. How about we just compare it to 2023? That’s what year it is.”
Grisafi says not only is the weather different than 2012, but so are a lot of other factors that impact the market.
“The world is a different place than it was in 2012,” says Grisafi. “The interest rates are a different place than they were in 2012. Allegedly, these hybrid hybrids are just amazing. So give them a chance. Let’s see what if we were going to stress the crop out. Let’s see if these rains could help them. I don’t doubt that we’re not at that corn yield. And this is a time of year where people really focus on trying to be a predictor of what the yield is. And we’re forgetting by far the most important part. Do we have someone to sell to?”
Where’s the Demand?
Grisafi says demand is the biggest headwind for U.S. crops at the moment.
“Who are we going to sell whether we’re 178 yield or a 171 yield? Do we have someone to sell it to? You can see by the price action, the cattle, that there’s not a lot of cattle out there, the hog industry has been wracked, and we’ll see if demand is there,” says Splitt.
The one wildcard, according to Grisafi, is China.
“Keep an eye on China. If there was one surprise that could come, China’s having the adverse weather. If China came in to buy corn, that might be what takes us back to that $5.55 or $5.75 level,” he says.
Technical Talk
Splitt says from a technical standpoint, he’s looked back through years where the price action was similar. And he thinks it’s 2013 that draws the closest comparison.
“And so interestingly, we did go a little bit higher this year, compared to where we did in 2013, we had about three days of extra buying past the highs that were made in the March quarterly stocks and planting intentions reports that took us up close to $6.30 a bushel. But when you look at what we’ve done since then we’ve actually caught right back up to what we were doing in 2013.”
Splitt says on July 5 of 2013, December corn contract made a low of $4.90, but then rallied up to around $5.28.
“I think you’re gonna see something similar as we approach that report, we’re seeing some buying coming out of the Fourth of July holiday. And I think the thought is that you’re going to see the USDA reduced yield from the trend and acknowledged the poor growing conditions that we’ve had. Things have improved a little bit with some of the recent rain. But I think you’re likely to see the USDA bring yield down potentially, because of the extra acres we got on that report. 176.8 [bu. per acre] is the yield that we could see. That basically washes away those those extra 2 million acres. So anything below that, you’re potentially going to see a lower carryout month to month on the on the WASDE report from June.”
