“May you live in interesting times”
To say the least the grain markets over the last two months have been interesting. They started to the downside in May when several factors combined to pressure the markets. These include a fast start to our crop planting, poor exports, the prospect of very good South American crops and concerns about a possible recession. New crop prices bottomed in mid-May with local price for new crop delivery in the $4.50/bu range for corn and $11/bu for soybeans. Then summer arrived, and with it, a rapid expansion of drought conditions throughout a large percentage of the Corn Belt. The accompanying map shows conditions as of June 27. Approximately 60% of the corn and soybean acres are under some form of drought in the U.S. The drought has led to declining crop condition ratings with the worst conditions centered in Illinois. Nationwide, only half of the corn and soybeans are rated good to excellent as of June 26, which leaves this as one of the worst years for ratings on this date since the severe drought year of 1988.
Grain prices shot higher in mid-June, peaking at the height of drought concerns at over $1/bu higher on corn and $2/bu higher on soybeans than lows established just one month earlier.
June 30th stocks/acreage report
This report is often a game changer as it comes right in the middle of the growing season on top of what is usually a volatile weather period. This year certainly stayed true to form. While stocks on hand were about as expected, acreage numbers were all over the board, with corn acres 2 million over expectations and soybean acres a whopping 4 million less than expected. Somewhat surprising given the very dry first half of the growing season, yield estimates were left unchanged with record yields of 181 bu/ac on corn and 52 bu/ac on soybeans still plugged in.
When the dust settled at the end of June, a combination of improved rain forecasts for the central Corn Belt and a bearish acreage number has left corn back close to May lows, while the very bullish soybean acreage has trumped improved weather outlooks and leaves new crop prices near the highest point of 2023.
While nearby weather forecasts look more favorable, it is still a long growing season. Moisture reserves in a large portion of the central U.S. are low, and continued regular rains will be needed. It looks like the supply side of the equation will occupy our attention for the next 2 months, but it will be important to remember that underlying demand problems are still here, and weather rallies will need to be rewarded with sales.
This article originally appears in summer edition of Today’s Land Owner, authored by Nathan Deters, AFM
