The Farmer Who Cried Drought
Market Commentary for 1/5/24
The Mato Grosso region of Brazil had been experiencing the worst heat and drought in the last 40 years. However, recent rains and more moderate temperatures have improved conditions. Now moisture levels are about the same as the worst of the last 10 years. That year there was a 10% yield reduction.
Everyone wants to know how bad soybean yields will be, and if enough extra acres were planted to offset any yield reductions. The market seems to be reacting like last summer, when timely rains throughout the US helped sustain the health of the crop just enough to produce decent, but not record, yields.
It is possible farmers have “cried drought” one too many times. The market may just be tired of being fooled by premature social media posts of bad crops and disaster yields, and then later finding out it’s not as bad as everyone thought.
Or maybe this will be the year the market discounted early warning signs of a real widespread problem and there will be a significant yield reduction. Only time will tell.
3rd Biggest USDA Report – January 12th
This report will show the final 2023 yield and an updated estimate of current stocks stored in bins in the US as of last month. In general, the corn market seems heavily burdened by the 2-billion-bushel carryout, so it is unlikely the report will show anything to drive corn above $5 on the March contract.
However, few farmers seem willing to sell below $5 right now. So, regardless of what the report says, prices may not fall much further until more is known about the US crop this summer. I would not be surprised if corn futures continued trading between $4.50 and $5 for another 6 months.
Want to read more by Jon Scheve? Check out recent articles:
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