December corn had a bad week. There’s really no way to sugar-coat it.
With a drop of over 20 cents, the wind was taken out of the sails of corn bulls hoping for a weather-market run. While November beans lost a similar amount of ground, relative to corn, the losses paled in comparison.
Regardless, neither corn nor soybean producers went home for the weekend feeling good about the price action we saw.
In the case of corn, the math is easy for most production situations. Let’s look at a producer expecting a 225 bu. yield here in 2020. A 20-cent drop just cost the grower $45/acre in a few trading sessions IF their production matches expectations and prices would stay in this area.
The problem, as we all know, is prices can and do move much lower in years where weather is conducive to big yields.
While forecasts have a high-pressure ridge in early July, most feel it can’t and won’t stay around long, due to the moisture in the ground heading into this period. Considering we had a good fall in 2019 followed by an excellent spring for most this year, the corn went into the ground quickly and without many issues.
Given current crop conditions reports peg this crop at 72% good/excellent, it’s not hard to fathom a 180-national yield for 2020.
Now, much needs to happen to end with a final yield over 180, but if we do, rallies could be tough to come by.
Greater disappearance in stocks
On the bright side, we have a quarterly stocks and acreage report June 30th. My guess is stocks could show greater disappearance than the trade expects due to large grain-consuming-animal-units, which have been eating a lower test-weight crop than in years past.
Keep in mind the last time we saw a wet, low test-weight crop was in 2009. If you go back to the June quarterly stocks report in 2010, the trade was caught off-guard to the tune of over 400-million bushels. You certainly need to feed more corn to animals or to an ethanol plant to come up with the same energy. For acreage next Tuesday, one has to hope estimates are correct in that we’ve lost up to and over a couple of million acres of corn.
While this could stabilize a struggling market, it still may take some big surprises to get much of a rally going.
The last factor I’ll discuss on a positive take is corn usage for ethanol, which has increased for eight straight weeks from 53 million bushels all the way up to this past week’s total of 91 million bushels of corn grind for ethanol. While coronavirus issues are a concern, one must hope this trend continues.
For beans, the situation looks a little better. New-crop corn carry-out estimates range from 3-plus billion bushels all the way up to 4 billion bu., bean estimates are around 400 million bushels.
While Tuesday’s report could throw a monkey-wrench into a fairly-snug situation, I would think we’d need bearish stocks and acreage information to truly hurt this bean market.
Yes, we have stiff competition from South America amidst a trade war that has been far from easy, but one has to be encouraged by China’s willingness to buy U..S beans of late, pushing sales close to 100% of what the USDA is forecasting for bean exports.
The big question
So the question is ‘will we turn these markets around?’ My gut tells me we won’t see an October average for Dec corn under $3. Will we go lower than $3? Yes, if we see an estimate of 180 bpa or above, I have to think we trend down to sub-$3 levels.
On the other hand, I find it hard to believe we’ll be able to harvest 250-bushel corn in the I-states this fall and collect insurance. I look for bean prices to stabilize and rally on any weather issues heading into harvest. And while corn could struggle for the next several weeks with normal weather, I look for a rally sooner or later as cheap corn prices will likely fix the issue of cheap corn prices.