Karl Setzer

We are now at a stage of the marketing year where fundamental interest starts to shift. Up to this point, much of the attention in the market has been on getting this year’s corn and soybean crops planted. Now that this has been completed, market interest shifts more toward crop growth and condition. For the past several growing seasons, we have seen crop stress from drought. At the current time there is very little drought in the Corn Belt from widespread spring rains. As a result, we are seeing less weather premium in futures’ values. This is especially the case with yields being very respectable in recent years, even with weather stress.

The updated June acreage data for corn was bearish for the complex. The USDA raised its planted corn acreage estimate for this year to 91.5 million and its harvested acreage to 83.4 million. This is a 3 percent reduction from last year’s 94.6 million planted and 86.5 million harvested acres for corn. This is the 8th highest corn acreage on record since 1944. Corn acreage is expected to be down in 31 of the 48 main corn producing states. Using the revised harvested acres and a current yield estimate of 181 bushels per acre point to a 15.1 billion bu crop, 240 million bu more than the current USDA projection.

It is not uncommon to see elevated attention on U.S. weather conditions during the growing season, but this year we are seeing just as much weather interest from the global perspective. The Black Sea has been dry, causing crop loss in both Russia and Ukraine. This is on top of the losses in Russia from frost. Sources in Russia claim any crop impacted by frost has been reseeded, but this does not prevent drought losses, and production loss is still expected.

For once, we did see moderate changes to the U.S. corn balance sheets in the July update. For the 2023/24 marketing year, the USDA bumped imports up 5 million bu, but also raised feed and residual usage and exports by 75 mbu each to trim the U.S. carryout by 145 mbu. This put the U.S. carryout for this year at 1.877 billion bu. This is a 12.6 percent stocks to use and equates to a cash value of $4.65 per bushel.

The U.S. Climate Prediction Center has revised its La Nina forecast. The CPC now believes there is a 70 percent chance of a La Nina being in place from now through October. This probability increases to 79 percent from November through January 2025.

Weather remains a driving factor in daily price discovery. This is not just for production, but for transit issues as well. Growing interest is falling on river levels in the

This week we have seen interest in the market shift from being totally focused on the U.S. to seeing more interest on South America as planting season gets underway in that region. One of the main topics right now is intended acreage given recent dry weather. Argentine officials have stated they believe 5 million acres of intended corn acres may be seeded to soybeans due to better returns. It is thought total corn acres in Argentina will decline from 17 percent to possibly 30 percent.

Nearly all interest in the market right now is on the start of the U.S. corn and soybean harvest. Despite current discrepancies in yield potential, this will still add bushels to an already adequately supplied cash market. As a result, we are starting to see seasonal basis pressure build. The question now is how long this basis pressure will last. Many producers across the U.S. are indicating they will only sell what is absolutely needed this fall and may opt to pay for commercial storage rather than sell into a depressed market. If this is followed through on, it will limit our fall basis pressure, especially if yields start to fall.

One thing that is quickly becoming apparent with this year’s U.S. corn and soybean crops is high variability which is not that surprising given growing season weather patterns. Field reports are indicating variability in corn yields as high as 100 bushels per acre within a very narrow distance of each other. This spread is only expected to widen as harvest advances into more areas. So far, all soybean yields remain high but are expected to see the same spread as corn as harvest progresses.

One of the takeaways from the latest U.S. grain inventory report that may start to change the overall mindset of the market is how much demand increased from June through August this year from last. Over this span, corn usage was up 22 percent, soybeans increased 18 percent, and wheat was 11 percent greater. This elevated demand means the U.S. needs to produce larger crops to keep stocks to use from falling into rationing positions. This may be closer than thought, as current balance sheets indicate yield loss as little as 3 bushels of corn and 2 bushels of soybeans from current USDA predictions and we would be at that point.