First, the guessing game is now underway on both planted acreage and yields. USDA in March released their Prospective Plantings estimates showing planted corn acres this year would be 90 million acres and planted soybeans 86.5 million acres. Those estimates remain on the balance sheet for now, but there are often big changes to them before the season is done, starting with the June 28 Crop Acreage report.
The graph below shows volatility in planted acreage going back to 2000. It seems like many years since the soybean acres were consistently below 83 million acres. As prices increased, so did acres. Also interesting to observe the shifts between corn and soybean acres in just the last 5 years. In 2023, U.S. farmers planted 94.6 million corn acres. The estimate for 2024 dropped to 90 million. Planted soybean acres last year were 83.6 million acres and now pegged at 86.5. It’s a big jump from last year but not even close to the planted acres of 90 million in the spring of 2017.
Bullish, Average and Bearish
Immediately below are our first estimates of the ranges of acreage and yields that could possibly happen this year. Let’s start with corn. Our acreage estimate is slightly higher than the USDA’s at 90.5 million. On the bearish side, there is an outside chance that it is as high as 91.5 and on the bullish side, as low as 88 million acres. Whatever the final number is, we think the odds are high it’ll be within this range.
What’s more vulnerable, however, is the range in yield estimates. On the low end, we are estimating a drop down to 175 bushels per acre. The odds of that happening, in our opinion, are slim. We believe the bearish scenario at 184 is also slim. The good/excellent ratings to start this year are high and current weather forecasts mostly favorable, but there is a lot of growing season to go. Right now we are sticking with 181.
But look what it does to final carry over. At the average estimate of 181, the carryover is approximately 2.1 billion bushels with an expected price range of $4.00-$4.60. In order to get a bull market going, we need to use more or grow less to get the carry over down to a stocks-to-usage ratio of 10%. Basically, that means getting rid of 650 million bushels. That’s not going to happen on old-crop since the crop has already been harvested. It’s also impossible to increase usage that much between now and the end of August. Thus, it’s going to take a combination of lower planted acreage, or at least lower harvested acreage, and a lower yield. It would be a long shot for that to happen and we don’t think it will.
On the bearish side, it’s also unlikely that the yield could jump as high as 184. Genetics have been improving a lot but this would take near perfect growing weather in the top five states to attain that yield on a national basis. If it did, the result would be a carryover in excess of 2.6 billion bushels and a cash price of corn in the central corn belt under $4.00. Thus, for now, we are sticking with the estimate of 2.1 billion bushel carryover and an average price between $4.00 and $4.60.
Now let’s turn our attention to soybeans. We are using a tight planted acreage estimate of 86 to 88 million acres. The carryover supply would then range from 177 million bushels to 601 million. That’s why soybeans are so much more difficult to forecast than corn. Our carryout estimate is 431 million bushels. That’s about where the market is trading now. On the bullish scenario caused by a cut in yield to 48 bushels per acre and we could see soybeans over $14 again. Carryover for this year is too high to exceed that level but it is certainly a remote possibility. Bump the yield from 51 bushels to 52 bushels and the result in prices is disastrous.
History indicates extreme volatility during this time frame. We didn’t have space for the price charts in the printed edition, but they are posted immediately below. In the last three years from the second week of June to October 1, soybeans have had a wild price range. In 2021, the range during that time frame was $4.34, with a low of $11.85 and a high of $16.23. In 2022, the range was $3.87 and in 2023 the range was $3.66. The one big difference is in those years the market was starting at high price levels. During the time frame mentioned the pressure was on the downside of the market.
But this year we are entering this timeframe at a much lower lever in both corn and soybeans, so are we due for a huge rally? We seriously doubt it, but never say never. Let’s just hope that we don’t have a similar sell off from these levels. Soybeans are always a wild card for several reasons, but we are having a hard time seeing significant upside or downside for prices for either commodity at the moment.
Putting It All Together
Since mid-May, corn has had a dramatic drop in prices. December futures dropping from $4.96 all the way down to this week’s low of $4.58. At a bare minimum, this market should go through a significant correction. The major resistance area in December corn is $4.75 to $4.80. Certainly, a strong possibility that could happen. In the case of November soybeans, during the same time frame the market has dropped from $12.30 to $11.50. A normal correction should take this market back to approximately $11.90. Significant weather problems will have to occur for the market to get any higher than that. From a strategy point of view, we are in very good shape; 100% sold on old-crop (harvested) soybeans and 90% on corn, with an average price of $5.09 on the corn and $6.50 strike at $14.11 on soybeans. As readers know, we were an aggressive seller long before harvest. For producers that are not in that category, make small sales, avoiding panic sales on days and or weeks that the market is down sharply. But on rallies that could occur within the next two weeks, scale up sell.
