Lots of Cuts

What’s Happened…

Challenging growing conditions throughout much of the Corn Belt this past spring and now summer have left the crop somewhat damaged and bruised. In total, a good (not great) crop. The idea of a great crop and yield exceeding last year seemed in jeopardy early in the season as hot and dry conditions plagued the western states, while wet conditions affected parts of the eastern states. Fringe production states such as North Carolina were late to plant due to extreme dry conditions. Recent private surveys (boots on the ground) aligned with a USDA yield reduction on the August WASDE report, suggesting further reductions in yield are likely. In total, the crop is good, though not a repeat of last year or even 2024, both record yields. There’s an old saying, “death by a thousand cuts.” While not dead, the crop is certainly reduced due to a number of factors limiting yield potential. 

Why this is Important…

The implication is tighter supply. A smaller crop in an era of bigger demand, due to increased usage both domestically and worldwide, continues to underpin price support for corn, both in the near-term and potentially in the long-term. With this year’s corn crop smaller than last year, it now puts pressure on both the U.S. and world crops to come through in 2027. If not, it would not take long for price rationing to occur and send futures higher. As the fall unfolds and there’s a better grasp as to what this year’s crop really is (harvest results), we will see the tone for next year’s price activity. Outside influences such as geopolitics and weather (think Super El Nino) could have a magnified impact on price movement and direction. From a producer’s perspective, capturing gains and yet being able to take advantage of future potential price opportunities is important to avoid getting caught on the wrong side of the market, potentially in a big way. 

What can you do about it?

Think through different scenarios of price movement. This author suggests that on the first expected 25 to 35% of production for 2027, consider selling on price value using forward contracts, hedge–to–arrive contracts, or futures. The idea is that, regardless of where the market may go, you can rationalize and defend the activity of locking in returns that are favorable for the operation. Explore other marketing tools that are offered to you through cash marketing or through a brokerage account. Make sure your lender is prepared to provide a hedge line of credit. Regardless of the tool used, make sure you understand the cost, risk, and potential. Put numbers on paper and use this in communications with your lender so you have finances available if you’re hedging and prices continue to move higher. Ultimately, your goal is to create a balanced marketing approach, flexibility, and a heightened confidence of the tools in your marketing toolbox. 

Find out what works for you… 

Work with a professional to find the strategy or strategies that are best suited for your operation. Communication is important. Ask critical questions and garner a full comprehension of consequences and potential rewards before executing. The idea is to make good decisions for the operation and less emotionally–charged responses to market moves, which are always dynamic.

About the Author: With the wisdom of over 36 years at Total Farm Marketing and following across the Grain Belt, Bryan Doherty is deeply passionate about his clients, their success, and long-term, fruitful relationships. As a senior market advisor and vice president of Brokerage Solutions, Doherty lives and breathes farm marketing. He has an in-depth understanding of the markets and marketing tools, an excellent listener, and communicates with intent and clarity to ensure clients are comfortable with their decisions.

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Author

Bryan Doherty