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Carryout for U.S. grains is still historically tight and only Mother Nature can fix it.

Naomi Blohm, senior market adviser

March 2, 2023

5 Min Read
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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].

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

About the Author(s)

Naomi Blohm

senior market adviser, Total Farm Marketing by Stewart Peterson

Naomi specializes at helping farmers understand how to manage cash marketing needs and understand the importance of managing basis, delivery point considerations, cash flow needs and storage capacity. She earned her Bachelor of Arts in Political Science with a minor in Agriculture Business at the University of Wisconsin in Platteville. She has a Master of Science in Adult Education with an emphasis in Ag Economics from the UW-Platteville and a Master Certificate in Global Education, from the UW-Oshkosh.

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