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May/June 2024 Risk & Reward: What to watch in the markets as spring fieldwork hits its peak

Jacqueline Holland, Grain market analyst

May 2, 2024

8 Min Read
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Planting activity is well underway across the Heartland. Here is a quick snapshot of the major market movers in the corn, soybean, wheat and fertilizer markets that should remain on your radar while you are busy with fieldwork through the month of May. 

Corn: Exports go to bat 

While farmers in the U.S. are focused on planting right now, their South American counterparts are focused solely on harvesting. South American corn exports will be on deck in late June, but until that point U.S. exports are in the batter’s box. 

And unlike my beloved Chicago White Sox, what a difference a year makes. Between the end of February and mid-April, weekly U.S. corn exports were more than 40% higher than the same time a year prior. That took nearly 132 million bushels of surplus 2023 corn supplies off the domestic balance sheet, or 2% of March 1 corn inventories.  

Higher E15 blends are back in the lineup for summer. Lucrative cattle prices and dry pastures in the West are likely to strike out hopes of livestock herd expansion this summer, although an uptick in Jan. 1 bred heifer inventories suggests that lower feed costs are making beef producers make riskier bets on whether to rebuild breeding stock or cash in on high prices. 

But these demand factors are only base hits for corn prices. The home run play for corn markets as planting activities reach their peak will be weather patterns in Brazil during the first week of May. In late April, forecasters were calling for above-average warmth across Brazil’s corn-growing regions in early May. And while the first few weeks of May were expected to feature rain surpluses for southern Brazil, Mato Grosso was more likely to remain dry. 

Late April and early May rainfall for Brazil’s safrinha corn crops is critical for yield development — not dissimilar to July rainfall totals for U.S. corn. If Brazil runs into drought trouble in early May — or if Mexico and Japan go on another buying spree — be ready to jump on that spring rally. 

Just like baseball, how can you not get romantic about the corn markets? 


Soybeans: New supplies on horizon 

Outside of planting chatter, U.S. soybean markets are in a bit of a news lull right now. Crush production remains stronger than at any point in history, helping to offset a lackluster marketing year for the export market.  

But many of the new crush plants expected to come on line in 2024 won’t do so until late summer or early fall. Plus, spring is traditionally a quiet time for the U.S. soybean export market. This year is no exception as Brazil is dominating the soybean export market. 

Up to late April, international buyers had booked nearly 52% fewer new-crop soybean export orders for 2024-25 than at the same point a year prior. USDA’s February soybean export estimates for 2024-25 were projected 9% higher than the current marketing year to nearly 1.88 billion bushels. That number could run higher if more acres are found for soybeans in USDA’s June 30 acreage report.  

But if new-crop export orders are an indicator of smaller export volumes expected in 2024-25, markets will be keeping a close eye on those missing export bushels and if domestic crush facilities will have enough capacity to consume the extra bushels expected to be produced from the 2024 U.S. crop.  

Through February, USDA expected 2.40 billion bushels of 2024 soybeans to be diverted to domestic crush plants — a 100-million-bushel uptick from the current marketing year. USDA’s 2024 Prospective Plantings report signaled 86.5 million acres of soybeans could be planted this spring. Given a trend-line yield of 52 bushels per acre, that would put 2024 production at 4.44 billion bushels, adding at least 275 million more bushels to the soybean balance sheet in 2024-25. 

If USDA’s forecasts hold true and an extra 100 million bushels each is sent into export channels and crush plants next year, that will leave an extra 75 million bushels available for crush capacity. New plant openings could consume at least two-thirds of that total if the economic incentives are in place for plants to run at full capacity at startup.  

Soybean usage has been growing faster than soybean production in recent years in the U.S. The 2024 growing season is likely to be a transition year that could see that delta begin to narrow. At any rate, there is a good argument to be made that U.S. soybean producers may start to enjoy reduced freight expenditures as domestic demand for soybean production intensifies. 


Wheat: Weather woes in revive prices 

For months now, the world has been bracing for larger wheat supplies to be produced as part of the 2024-25 marketing year, which is slated to begin June 1. The world was finally moving on from El Niño, the Black Sea figured out how to continue shipping wheat amid ongoing turmoil, and South American production had been revived following a multiyear drought. 

But throughout April, the markets showed some signs that the surplus-wheat-supplies story that we analysts have been peddling for the better part of the past year has quickly become outdated.  

Five of the seven largest global wheat exporters are in the Northern Hemisphere. Each has faced weather turbulence this spring. Russia and Ukraine are coming out of atypical heat for early spring and dry skies. The Canadian Prairie stayed unusually dry throughout winter, and drought worries are creeping back into the Southern Plains through the second half of April. 

Producers across the European Union have battled the weather since their crops were planted last fall. Smaller acreages are forecast due to excessive fall showers. Dry weather in Eastern Europe has already caused crop stress. And atypical early spring warmth across the bloc has left wheat crops newly emerged from winter dormancy more susceptible to frost damage. 

These five producers — Russia, EU, Canada, U.S. and Ukraine — accounted for 69% of the world’s exportable wheat supplies, so it’s no small wonder that U.S. wheat prices rallied to multi-month highs by the end of April. 

And while I’d never wish bad weather on anyone, it might be just the price break growers in the U.S. need to maintain profit prospects for 2024 crops about to be harvested. Cheaper corn costs are leading livestock producers to opt away from adding wheat to rations. Domestic flour consumption has been trending lower over the past couple years amid a resurgence in low-carb diets and a pullback in pandemic-era baking. 

With 2023-24 export volumes slipping to the smallest level since 1971, there is nowhere to go but up for U.S. exports. And if we see persistently hot and dry forecasts in southern Russia during the first few weeks of May, then U.S. wheat growers could see more profitable harvest price prospects than what may have been anticipated earlier in 2024. 


Inputs: Will low prices for natural gas last? 

Late spring and early summer are typically quiet times in the fertilizer markets as producers race to restock supplies after spring applications. To be sure, prices have undergone their typical seasonal upticks this spring as application rates increased. But for the first time in several years, the price swings have been gradual instead of sudden. 

Since last fall, retail prices for nitrogen fertilizers in Illinois have risen 9% to 25%. Phosphate prices are up 12% to 13% between early September and mid-April. Potash quotes were 6% higher. Even though fertilizer prices are lower than last spring, the gradual increase in fertilizer prices over the past six months indicates that fertilizer producers have finally clawed back control over inventories after three consecutive years of market upheaval. 

The fertilizer producers are about to ramp up their summer refill production schedules to replenish the nutrients applied this spring. We are still a couple months away from fall pricing being released, though it seems less likely farmers will be able to enjoy the same deals as last year. 

Natural gas inventories also began their summer refill period in early April. After a warm winter in the Northern Hemisphere due to El Niño, natural gas futures prices for the first four months of 2024 echoed pandemic-era lows as June ’24 futures contracts traded below the benchmark of $2 per million Btu from February on. 

The low prices reflected record highs in weekly net propane production and surplus supplies after low winter usage rates. For farmers, that means that fall dryer fuel may be priced at a steal during late spring and early summer.  

But it is less certain that fertilizer prices — particularly nitrogen — will trend lower to reflect the lower cost of production derived from low natural gas prices. Last year’s losses due to surplus inventories are still fresh in the minds of fertilizer producers and retailers. And with many of the pandemic era kinks worked out of the supply chain, don’t be surprised if you hear of fertilizer producers taking more “scheduled maintenance shutdowns” this summer.  

Fertilizer producers are trying to maintain their profit margins and are likely to exert more of this supply control on the market to avoid repeating last year’s lower earnings. As a result, prices are likely to trend lower throughout the summer refill period, but there will be a price floor that limits how low those prices will drop in the months leading up to fall applications. 

It is worth noting that we are still in the early stages of planting season. If May ends up being a soggy month and derails farmers’ application plans, these dynamics could shift in favor to the farmer when pricing opens later this summer. 

About the Author(s)

Jacqueline Holland

Grain market analyst, Farm Futures

Holland grew up on a dairy farm in northern Illinois. She obtained a B.S. in Finance and Agribusiness from Illinois State University where she was the president of the ISU chapter of the National Agri-Marketing Association. Holland earned an M.S. in Agricultural Economics from Purdue University where her research focused on large farm decision-making and precision crop technology. Before joining Farm Progress, Holland worked in the food manufacturing industry as a financial and operational analyst at Pilgrim's and Leprino Foods. She brings strong knowledge of large agribusiness management to weekly, monthly and daily market reports. In her free time, Holland enjoys competing in triathlons as well as hiking and cooking with her husband, Chris. She resides in the Fort Collins, CO area.

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