Row Crop Prices Continue Lower into the New Year

What’s happened…

As 2023 ended, there were many who thought grain prices might rebound, anticipating that managed money would pull out of short positions. Unfortunately for producers, that was not the case. Cash and futures prices instead slid into the end of 2023 and quickly resumed their downtrend into the first two weeks of 2024. The most recent Commitment of Traders report indicated that managed money added short positions in corn and soybeans, likely viewing South American weather as improving. Adverse growing conditions have many analysts forecasting smaller Brazilian soybean and corn crops. Still, combined production between Argentina and Brazil may exceed a year ago.

Adding to price pressure is a recovery in the U.S. dollar and increasing shipping rates throughout the world due to wars between Ukraine and Russia, as well as Israel and Palestine. Turbulent weather expectations during the midwinter months will be less than desirable for shipping, creating a slower pace as ships divert storms. Dry regions in parts of the world continue to limit shipping options, meaning more travel distance and expense. The bottom line: when you add it all together, this creates an environment where rallies just cannot get a footing, and the end user remains reluctant to purchase ahead. Higher interest rates and lower values in dairy, cattle, and hogs are keeping buyers hand-to-mouth.

Why this is important…

Unfortunately for many row crop producers, this has created a stress level that wasn’t anticipated. They held off making marketing decisions, expecting a post-harvest price recovery. Supporting their bias for higher prices was weather in the Southern Hemisphere (El Nino), creating a less-than-ideal planting season for much of Brazil. Soybean prices rallied into mid-December and have since turned lower, as improved rain totals in parched regions in Argentina and Brazil suggest that declining crop conditions have leveled off or improved. Looking forward, on January 12, the USDA will release its next USDA report, and many are expecting a small increase in domestic yield for both corn and soybeans. This would be reflective of better-than-expected yields many experienced this past harvest, especially in the upper Midwest. The dilemma now is what to do with inventory on hand.

What can you do?

The focus is on strategy. Keep your pencil sharp and conversations with elevators and buyers active. End users know that farmer supplies are large and at some point, they will need to move it. There is a carrying charge in the market, which suggests farmers should hold inventory. However, to take advantage of this carry, you may need to hedge (sell futures) to secure the futures price and then look for basis improvement. If you’re in an area where the basis has improved, be more aggressive at selling. Know how to retain ownership on paper. You don’t have to own inventory in a storage bin to participate in a price rally. Ask lots of questions. Understand the risks and opportunities in any strategy before entering. Learn what will work best for your operation. Keep your phone busy, talking to the right people that can help you achieve your goals.

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.

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Bryan Doherty