TOP FARMER WEEKLY PERSPECTIVE 4/14/2023 BY BRYAN DOHERTY

Is the Biggest Corn Crop Already in the Books?

The March 31 Prospective Acreage report indicated farmers intend to plant 92 million acres of corn. If realized, and yield is accurate at 181.5 bushels per acre (according to the Outlook Forum in February), this would be the largest corn crop on record, at just over 15 billion bushels. With the potential for some acres lost or a chance the upper Midwest will have a late start, is the largest number for the year already on the books? The answer – probably.

Let’s first look at why farmers may plant more corn acres. The simple answer is they’re good at it and like to do it. More importantly, availability of fertilizer and good results in recent years, despite challenging weather, have many farmers tipping their preference toward corn versus soybeans. The soybean price outlook may be favorable in years to come due to increasing crush plants. That probably won’t have much impact for the 2023 season. Farmers often plant for volume and shoot for yield. Consequently, this could solidify another large crop. The question is if this spring is likely to produce the right environment across the nation for record yields. Most states are increasing corn acreage with the leader, North Dakota, adding 15%. North Dakota is off to a late spring, as significant snow cover has blanketed most of the key growing areas. Without an early start, is it possible to pull high yields? Though it is possible, the odds don’t favor it. The futures market may be telling us this as well, as prices slipped after the Outlook Forum in late February. Since then, they have held near the $5.50 to $5.60 area, even after the larger-than-expected acreage estimate on March 31.

No matter how you slice it, it will be another interesting year ahead. The December 2023 corn futures price has been on a slippery slope for some time, last peaking in October at just over $6.37. If recent history is any indicator (since 2013), at some point, this contract may lose 25% of its value. That will point to a target near $4.78. Therefore, there may be a couple items currently baked into the price. There is either roughly 75 cents of weather premium or a lack of belief that yield at 181.5 bushels is achievable. Many corn-producing states that picked up acreage are considered on the fringe of key-producing states. To anticipate they will lead in yield production may be unrealistic. The other scenario is the market just doesn’t have confidence that the crop can be that big, at least not yet. If that belief grows, it will lose the remaining 75 cents gradually over time as the crop matures. It will take strong evidence that a record yield will occur.

The way the world fundamentals are currently shaping up, it doesn’t look like there is an urgency to ration supply, despite relatively snug inventory. As of this writing, Brazil’s second crop corn continues to mature without any significant weather threat. Exports, while they have picked up lately, remain on a path substantially below a year ago. Ukraine will not produce the type of crop the market is used to, however, this may already be factored in. For now, prices could grind lower.

How do you manage all these unknowns? We suggest you consider viewing rallies as selling opportunities until the market proves otherwise. Strive for balance, as changing weather forecasts will likely cause volatility to pick up in the weeks and months ahead. Historically, weather is the most dominant variable in determining crop size.

Consider visiting with a professional to learn about different ways you can manage the unknown. Before entering into any strategy, know your risks and rewards.

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

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

Author

Bryan Doherty