Supply is still the driver for this fall’s corn and soybean markets.
While the COVID-19 pandemic and the political turmoil surrounding the election have been factors in the market, the big one is still supply, according to Don Roose, president of U.S. Commodities in West Des Moines.
Last spring the USDA estimated a corn carryout of about 3.4 billion bushels. That number is now down to about 1.7 billion bushels. The carryout figure for soybeans is down to about 190 million bushels. The pipeline minimum is about 100 million bushels, Roose says.
What all of that means is that weather conditions have led to a poorer than expected crop in the United States and in several other parts of the world. That has led to a reduction in the carryout and has pushed prices higher in the last three months.
For farmers, it may mean a switch in marketing strategy from trying to reduce risk to trying to increase opportunity.
Farmers may want to sell grain now because there is not a huge incentive to store it and also because quality concerns may lead to issues in grain storage. For some farmers, use of market tools to protect themselves against upside market moves may be more important than moves to protect themselves from downside market moves.
Of course, Roose says it would be wise for farmers to reward this rally in some fashion because there is still the chance it could disappear as South American crops come out of the field in a few months. And he says farmers may also want to consider selling some of the 2021 crop while the opportunity to lock in a profit is there.
But for the moment, China is still buying and it is early in the growing season in South America. Because this is a La Niña year, there may also be a higher risk of dry conditions in South America.