A look at corn prices moving forward

By Jon Scheve, Superior Feed Ingredients, LLC 

The corn market might have finally found a temporary bottom, but everyone wants to know what direction corn prices will go in 2024. Weather here and around the world is the biggest price driver, but it is impossible to predict long term. Therefore, below are three charts that could provide some historical perspective for upcoming marketing plans.

Corn yields from 1975 to 2023

Since 1975, the national yield has increased from about 90 bushels per acre to nearly 180.

Over the last nearly 50 years, the average national yield has been within 2 bushels of or above the trendline yield almost 75% of the time. Using a linear trendline suggests that statistically, this year’s corn yield could be around 180.5. In most years, the weather is favorable enough to produce a normal crop across the U.S. as a whole. 

When will futures prices hit the high for the year?

Futures prices are always changing based on weather risk and global supply and demand. This makes it difficult to know when a good time to sell corn will be. Again, reviewing historical trends can help gain some perspective.

The following chart shows which month December corn hit its high for the year the corn crop was planted. 

Over the last 34 years, there is a 50% chance for selling at the year’s high after planting begins and before the end of July. There were only two years when the high occurred in January (2001 and 2013). All the March highs occurred in the ‘90s.

What about after the ethanol mandate?

Over the last 17 years, June has had the most highs with May being the second most. When highs happen in other months it is usually due to unexpected scenarios:

  • August — 2011 and 2012 — both severe drought years
  • January — 2013 — after a severe drought in the previous year
  • November — 2010 after a large, unexpected yield drop at harvest and 2020 when China unexpectedly bought a huge supply
  • July — 2015 and 2017 — big carryout years with a mid-summer weather scare that was ultimately not a big problem.

Is there potential for the market to rally?

The odds seem to point in that direction. In 16 of the last 17 years, December corn has traded higher by at least 3% or more at some point after Jan. 2 (2013 it did not). In five years, the rally was between 3%-8% and another five years had 10%-20% price rallies.

The larger price rallies of 33%-64% happened in very dry years and/or when there were large, unexpected demand increases. In those years, waiting to price corn even later ended up being the best strategy. Regardless, in almost all years waiting to price until after the start of planting season was the right choice.

December corn closed at $4.98 on Jan. 2. If this is not the high for the year and using history as a guide, then a 3% price increase would be over $5.10. A 6% increase would be above $5.25, and a 10% increase would mean nearly $5.50. 

Bottomline

History says the chances of the high occurring in January are low. And, while past performance is not indicative of future results, December corn values trading over $5 again still seems possible over the next 10 months. 

Please email jon@superiorfeed.com with any questions or to learn more. Jon grew up raising corn and soybeans on a farm near Beatrice, Neb. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.

Trading of futures, options, swaps and other derivatives is risky and is not suitable for all persons. All of these investment products are leveraged, and you can lose more than your initial deposit. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful, and in accordance with applicable laws and regulations in such jurisdiction. The information provided here should not be relied upon as a substitute for independent research before making your investment decisions. Superior Feed Ingredients, LLC is merely providing this information for your general information and the information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision. The contents of this communication and any attachments are for informational purposes only and under no circumstances should they be construed as an offer to buy or sell, or a solicitation to buy or sell any future, option, swap or other derivative. The sources for the information and any opinions in this communication are believed to be reliable, but Superior Feed Ingredients, LLC does not warrant or guarantee the accuracy of such information or opinions. Superior Feed Ingredients, LLC and its principals and employees may take positions different from any positions described in this communication. Past results are not necessarily indicative of future results.

Check Also

Will official agencies review Brazil’s crop projections again?

By Guil Signorini, Department of Horticulture and Crop Science, The Ohio State University The grain …

Leave a Reply

Your email address will not be published. Required fields are marked *