Last year I emphasized the reality that in the United States there were nine grain and oilseed commodities that had historically tight carryout levels. What was historic was not only that the carryout numbers were remarkably small, but that there were nine grain and oilseed commodities suffering tight ending stocks, all at the same time.

Fast forward one year later. It is important to note that nothing about this situation was “fixed” last year. Carryout levels are still tight, and in some instances tighter than one year ago!

Demand for grains has overall remained strong (in spite of higher commodity prices and a higher U.S. dollar). Supplies of grains in the United States and globally are also still snug due to the Russia/Ukraine war and an uncooperative Mother Nature last summer not only in the United States, but for the entire Northern Hemisphere.

A closer look

In fact, when you compare the last five years of February USDA WASDE information, carryout levels are actually smaller than a year ago, for corn, all wheat, soybeans, and sorghum, with carryout levels in general still trending lower from just five years ago.

With carryout levels tight, it makes sense that corn and soybean prices are still trading near historically higher price points.

Related:USDA expects U.S. grain harvest increase in 2023

Comparing prices

Over the past week, nearby corn and soybean futures have had a significant price pull back due to position squaring by the funds into February month end, and technical selling.

As of this writing, May 2023 corn futures are trading near $6.25. One year ago, May 2022 corn futures were trading higher, near $7.00, as the shock of the war had just kicked in. Interesting that corn carryout is smaller than a year ago at this time, but prices are now less. Sounds like this might be an opportunity for corn end users to step up their needs.

As of this writing, May 2023 soybean futures are trading near $14.80. One year ago, May 2022 soybean futures were trading near $16.40, again, as the war was just beginning and buying commodities as a hedge against inflation was the hot trading tip. Again, it is interesting that soybean carryout is smaller than a year ago at this time, but prices are now less.

Trading the future

As you know, the commodities markets are in the business of trading the future. Right now, traders are assuming that the great American farmer is going to save the day and plant huge crops for this upcoming crop year.

Will it happen? So much can change between now and spring planting. Last minute competition for acres will likely occur. Spring weather is anyone’s guess as to whether our crop will be planted in a timely manner, and who knows what summer weather will bring?

Looking globally, half that second crop corn in Brazil is being planted LATE, which will likely not allow for record yield (which the world is assuming will happen…). Also, you know that war is still happening in Ukraine and agreement is growing that Ukraine’s 2023 planted corn acres will be down as much as 50% from a year ago (which was already down from the year prior).

So now we have the Ukraine crop likely lower again this spring, odds weighing in for a smaller than expected Brazil corn crop, and the USDA providing hope that the American farmer will swoop in and plant a huge crop, to keep global corn prices lower.

With the USDA Outlook Forum behind us, I think we have seen the biggest corn acre number on print for the upcoming calendar year. At the Outlook Forum, the USDA pegged corn planted acres for this spring at 91 million acres. While I agree with an increase in acres from last year’s number of 88.6 million acres, I’m not vibing with a jump to 91 million acres, especially since all those U.S. grain and oilseed commodities still need to compete with acres because we are still dealing with historically tight ending stocks!

Lastly, keep in mind, when all the advisors are on TV, or writing articles about $4.00 corn, and they all are leaning bearish -- you know what they say about that. When everybody is suddenly bearish, a short term low might actually be lurking.

Reach Naomi Blohm at 800-334-9779, on Twitter: @naomiblohm, and at [email protected].

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