USDA Reports Increase Corn Supply

What’s Happened….

On June 28, the USDA released 2 reports, both of which had a negative implication for corn prices. Quarterly stocks, a survey of corn on hand, indicated more supply than the market was anticipating. In addition, farmers who responded to surveys indicated a higher percentage of acres planted to corn than expected. The quarterly stocks figure came in at 4.993 billion bushels, 126 million bushels above the pre report estimate. Expectations for acreage were near 90.27 million. The actual figure came in at 91.5 million. Expectations for larger supplies on hand and more production for 2024 sent prices reeling, with most futures contracts losing double digits by the end of the day.

Why this is Important….

The implication of more negative news for prices suggests that, unless weather problems develop from mid-July or later, the reports were a signal to end users (domestic and foreign) that there is no rush to secure inventories. Prices are low, yet buyers are now more likely to remain buying hand-to-mouth. For producers, this is problematic. Growing supplies based on current expectations that this year’s crop will be near average would imply a need to more aggressively sell the remaining 2023 crop. If there is not enough storage for the upcoming crop, then you will need to decide to store commercially or spot sell at harvest.

What can you do about it?

From a producer’s perspective, your choices may be limited. You can sell now at the current prices (near the yearly low) or store, hoping for a recovery. If storing, then logistical considerations for when and how you deliver need to be asked with a new crop quickly approaching. A pragmatic approach is to sell corn on a weekly basis until your bins are empty. If you know how to use futures or options, then re-ownership may be just a phone call away. You don’t have to own corn in storage to participate in a price rally.

For the new crop, if you have extra bushels beyond on-farm storage capacity, you must choose between spot selling and paying for commercial storage. You might consider forward selling for fall delivery if you believe prices will be even lower at harvest than they are currently.

For end users, while the market may be signaling there is no rush to buy, keep in mind that prices are low from a cost-of-production analysis. In addition, long-term price charts suggest current prices offer excellent value. Monitor the market carefully. If there are signals that a low price may be at hand, then buy more aggressively. In addition, ask questions to your vendor and advisor as to what tool or contracts are available to you. Unless you ask, you may never know.

Find out what works for you….
Work with a professional to find the strategy or strategies that are best suited for your operation. Communication is important. Ask critical questions and garner a full comprehension of consequences and potential rewards before executing. The idea is to make good decisions for the operation and less emotionally charged responses to market moves, which are always dynamic. Now is not the time to take your eye off the ball.

About the Author: With the wisdom of 30 years at Total Farm Marketing and a following across the Grain Belt, Bryan Doherty is deeply passionate about his clients, their success, and long-term, fruitful relationships. As a senior market advisor and vice president of brokerage solutions, Doherty lives and breathes farm marketing. He has an in-depth understanding of the tools and markets, listens, and communicates with intent and clarity to ensure clients are comfortable with the decisions.

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.

Author

Bryan Doherty