Crop Tour Wrinkle

What’s happened…

The much-anticipated Pro Farmer crop tour found both the corn and soybean yields below the most current USDA estimate. Challenging dry conditions and periods of high heat stressed the crops regionally. The tour estimate is 172 bushels per acre for corn, below the August USDA estimate of 175.1. Earlier in the year, the highest estimate was 181.5 bpa. For soybeans, the tour estimates per-bushel yield at 49.7, below the August USDA estimate of 50.9. The highest estimate for the year was 52. Are the numbers impactful? Yes, there is some impact for corn and great consequences for soybean supplies if these estimates hold.

Why this is important…

One key number that represents the combination of supply and demand is carryout, or the number of bushels expected to be left over at the end of the marketing year. Harvested crop this fall will be recorded on the supply side of the ledger sheet for the 2023/2024 crop marketing year. Projected carryout, therefore, will be expected bushels left over at the end August 2024, after demand is subtracted. For corn, plugging in the Pro Farmer figure lowers projected carryout to near 1.96 billion bushels (assuming no other changes), still a large figure. The idea of rationing supply is not likely, and end users will probably not chase prices higher. On the other hand, soybeans dropping 1.2 bushels could drop carryout to near 180 million, historically a snug number.

As with any report, change in the future is likely. Weather is still a major factor and projected demand will likely change monthly. Big competition from Brazil and Argentina looms on the horizon. China’s economy continues to look weak. The next World Agriculture Supply and Demand Estimates (WASDE) report is due for release September 12. Officials recently stated that acreage figures could change.

The bottom line is that much is ahead for markets and prices. Until the September 12 report, the market will likely focus on weather and crop prospects.

What can you do?

A bearish tone has plagued price rallies all season. Be prepared for this again If the USDA does not agree with the Pro Farmer analysis, or if demand is lowered. Prices could drop rapidly in both corn and soybeans. Buying put options can establish a price floor and leave the upside open for price advances. If you sell futures or forward contracts, consider buying call options to retain ownership. You’ll also want to be positioned for a price rally. Talk to a professional to learn about ways to protect yourself. Be aware of the opportunities and risks of any scenario. The key is to be balanced in your approach to marketing, so you are prepared for whichever way the market moves.

Editor’s Note: If you have any questions on this Perspective, feel free to contact Bryan Doherty at Total Farm Marketing: 800-334-9779.

About the Author: With the wisdom of 30 years at Total Farm Marketing and a 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 tools and markets, listens, and communicates with intent and clarity to ensure clients are comfortable with the decisions.

The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

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Bryan Doherty