Marketing Opportunities Will Exist During Rallies, But Elevator Corn Prices Are Already Below $3

 

By Matt Brandyberry
The year’s corn and soybean crop sizes are substantial and developed faster than normal. Throughout the growing season, crop conditions have seemed to improve.  

The saying rain makes grain is true, and there has been plenty of moisture in most areas this year. We’ll see what the derecho thunderstorm that hit the I states will do to overall yields. Carry-in from crop year ‘19 for both corn and soybeans have become larger in recent USDA updates. The carry-in, combined with this year’s anticipated record yields on increased acreage suggests burdensome ending stocks will remain.

Despite China’s huge grain purchase in late July, large ending stocks lower the chance of a sustained price rally back to pre-COVID levels. The corn board has built in resistance levels at prices in the low to mid $3.00. Cash bids have closed below $3.00 at many elevators. Harvest prices on nearby delivery periods are reflective of a year when profit hopes have been harmed by over-supply and damaged demand. Soybeans have remained range-bound with $9.00 futures offering resistance.

Soybean prices fared better than corn prices from February – August 1, but now appear to be sputtering downward, ticking year-long resistance levels. With the nearing election, board prices have another reason to make a large change. Whether President Donald Trump or the Democratic challenger, Joe Biden wins, will influence trade with China and our ethanol policies.

After past presidential elections, changes to trade amounts, restrictions and negotiations occured shortly thereafter. The negotiating party, or China, may also act differently, depending on the election. All of this has and will continue to impact farmers’ revenues and profit per acre. In the area of monetary policy, recent falling prices for the U.S. dollar have helped exports.

During July, the dollar lost value relative to other nations’ currencies. Export sales were recorded in near record amounts to China for both corn and soybeans. Prices have moved higher from very low levels, but seasonal harvest of a large crop can deliver lows during the beginning to middle stages of the harvest period.

Price action has been weak all year, and we have seen a dead cat bounce multiple times. With this year’s crop size, don’t be surprised to see another small, brief recovery in prices after bins are filled to capacity. Opportunities certainly exist to market during rallies.  

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