Jon Scheve with weekly market commentary made on April 5, 2024
History repeated itself again this week. Just like the last 10 years, May corn futures finished lower than the close one week after the March planting intentions was released.
Where Will Prices Go from Here?
In 2016, 2021, and 2022 the price of May corn rallied over the next 3 weeks. In 2021 and 2022, old crop corn carryout was very tight. However, in 2016 as is the case this year the stocks are not tight.
In 3 of the last 10 years, May corn’s value at the end of April was similar to or a few cents higher compared to the value of corn at the beginning of April. And in the other 4 of the last 10 years, corn finished the month lower than where it started. So, based on historical trends, there is a good chance May corn will not finish the month much higher and could end up even lower.
Plus, the March USDA stocks report suggested there is a lot of unpriced corn still being stored on farms. That means rallies may be limited as farmers sell into any upside price opportunity.
What About New Crop?
For the past 10 years, December contracts behaved like May contracts with rallies in 2016, 2021, and 2022 by the end of April. Again, the 2021 and 2022 rallies were due to tight stocks as the market was trying to buy acres.
The 2016 rally had two main differences compared to 2024 that make the two years difficult to compare to one another. One, the projected carryout from the 2015 harvest was tighter than what we have today. Two, corn values in April 2016 were $3.70 compared to the current value of $4.70.
Will A Record Crop Be Produced This Year?
The following summarizes how many times US corn production hit a new record:
19 out of the last 48 years or 40% of the time
8 out of the last 20 years or 40% of the time
5 out of the last 10 years or 50% of the time
Using history as a guide, new record yields in the US are happening at least 40% of the time or more. Unfortunately for those who wish for prices to go higher this year, the national yield doesn’t even have to set a record for stocks to keep increasing and keep a lid on prices.
Bottomline
Farmers have not been selling, which is likely keeping prices higher than they should be. Plus, there is a lot of weather premium in new crop values, despite only 90 million acres projected to be planted. There is little suggesting a rally will happen soon.
That doesn’t mean corn can’t rally, only that it may be difficult with what we know today. Significant planting delays throughout the US in May or severe dry weather in late June could still drive prices to significantly higher levels.
Jon Scheve
Superior Feed Ingredients, LLC
9358 Oak Ave
Waconia, MN 55387