Jon Scheve with weekly market commentary made on January 26, 2024
The corn market might have finally found a temporary bottom, but everyone wants to know what direction corn prices will go in 2024. Weather here and around the world is the biggest price driver, but it is impossible to predict long term. Therefore, below are three charts that could provide some historical perspective for upcoming marketing plans.
Corn Yields From 1975 to 2023
Since 1975, the national yield has increased from about 90 bushels per acre to nearly 180.
Over the last nearly 50 years, the average national yield has been within 2 bushels of or above the trendline yield almost 75% of the time. Using a linear trendline suggests that statistically, this year’s corn yield could be around 180.5. In most years, the weather is favorable enough to produce a normal crop across the US as a whole.
When Will Futures Prices Hit the High for the Year?
Futures prices are always changing based on weather risk and global supply and demand. This makes it difficult to know when a good time to sell corn will be. Again, reviewing historical trends can help gain some perspective.
The following chart shows which month December corn hit its high for the year the corn crop was planted.
Over the last 34 years, there is a 50% chance for selling at the year’s high after planting begins and before the end of July. There were only two years when the high occurred in January (2001 and 2013). All the March highs occurred in the ‘90’s.
What About After the Ethanol Mandate?
Over the last 17 years, June has had the most highs with May being the second most. When highs happen in other months it is usually due to unexpected scenarios:
August – 2011 and 2012 – both severe drought years
January – 2013 – after a severe drought in the previous year
November – 2010 after a large, unexpected yield drop at harvest and 2020 when China unexpectedly bought a huge supply
July – 2015 and 2017 – big carryout years with a mid-summer weather scare that was ultimately not a big problem
Is There Potential for the Market to Rally?
The odds seem to point in that direction. In 16 of the last 17 years, December corn has traded higher by at least 3% or more at some point after January 2nd (2013 it did not). In five years, the rally was between 3%-8% and another five years had 10%-20% price rallies.
The larger price rallies of 33%-64% happened in very dry years and/or when there were large, unexpected demand increases. In those years, waiting to price corn even later ended up being the best strategy. Regardless, in almost all years waiting to price until after the start of planting season was the right choice.
December corn closed at $4.98 on January 2nd. If this is not the high for the year and using history as a guide, then a 3% price increase would be over $5.10. A 6% increase would be above $5.25, and a 10% increase would mean nearly $5.50.
History says the chances of the high occurring in January are low. And, while past performance is not indicative of future results, December corn values trading over $5 again still seems possible over the next 10 months.
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