We waited for the Prospective Planting report on March 31 to give us insight into the grain markets for the 2025 crop. It should have been easy to draw some conclusions about spring market prices. It now seems that early conclusions were not valid.
This should have been a week when I could bask in the comfort of knowing that I wrote about the markets last week, and this week at this time I would feel good about my expectations. It didn’t work out that way.
Last week, shortly before I wrote about markets for the week, we got the big report we were waiting for. The U.S. Department of Agriculture told us that American farmers would plant more corn than anyone expected, and most of the acres would come out of soybeans. The current estimate is now that the farmers will plant 95.3 million acres of corn, 5.2% more than last year. That would give us 15.8 billion bushels in the bins, a new record. It was easy to predict that prices would go down on this news, especially since it was a surprise, with analysts coming in with lower numbers.
Then, we got the other side of that prediction. Soybean acres would be down 4.1%, at 83.5 million acres. Again, the conclusion was simple: Soybeans would rally out of this report.
Unexpected
The actual results, which are easy to report now that we are a week after the report, are not what we expected. The May corn futures gained 7 cents last week instead of crashing. The soybeans were almost unchanged for the week, but there is a story there. May futures were down 2 3/4 cents for the week, but April 4 they crashed 34 1/2 cents to $9.77, the lowest price since the middle of December.
Corn prices seem to firm because of other factors. Maybe traders were cautious about how bullish they were and expected worse news. Maybe the new carryout of about 2 billion bushels was less than was thought. It certainly couldn’t have been about foreign production. We are now being told that the Brazilian “cerrado,” or second crop corn, would be a new record for production. For whatever reason, we are now trading May futures at $4.66 after a $4.44 low March 31.
The soybeans are also not trading as expected. Lower acres should mean higher prices, but they don’t seem to right now.
Tariff trouble
Hanging over the market is a huge unknown, and the market treats most unknowns factors as negative to prices. The big unknown right now is the effect of tariffs on grain prices. In the “Trump 1.0,” as many are calling his first term, we put tariffs on the Chinese, and the farmers paid for it in the form of grain business being switched by the Chinese to Brazil. Since the big sales of grain to the Chinese are of soybeans, that might be thinking that hit the market April 4.
This time around, “Trump 2.0,” everyone’s tariff is being increased. In a year that the Brazilians have just produced a record soybean crop, we are giving the Chinese a big reason for buying their needs from Brazil. I saw an article this week quoting one Asian trader as saying that with the current tariff, no soybeans will go from the U.S. to China.
The good news is that we are in world markets, so even if the Chinese do not buy from us, their buying from Brazil is still demand for soybeans in general, and we will see the Chinese sales replaced by sales to other countries. That would be more valid if the Brazilians were not sitting on a record crop.
Ugly budget
The backdrop to this mostly negative mood in the markets is an ugly crop budget for individual farmers. A current article in Farm Futures, a Farm Progress online publication, looked at the cost of production this year compared to current prices. It should be noted that this is “full” cost of production, which usually means the full value of farmland is included. Their take is that the “full” cost of production for corn is $4.79 per bushel. At current prices, that would be a loss of $1.25 per bushel.
Similarly, soybeans are projected to average $11.90 at the farm gate. That would yield a loss of $95 per acre for producing soybeans. Given these figures, something has to give. The hope may lie in usage or exports that are more than predicted. We are now looking at 2 billion bushels of carryout for corn, which is 46 days. The corn carryout is predicted now at 477 million bushels, a 40-day supply. I would expect that the market doesn’t worry until the supply gets down to a month or so. That means that there is room to hope we get a little short. And, we need to remember that we are basing price predictions on some historically huge yields.
Looking ahead for better prices is to bet against ourselves as farmers. Still, the market now assumes a perfect spring and planting that agrees with the USDA current estimates. It assumes great summer weather. So, anything can still happen. The ugly truth is, however, that we need to see a lot of problems on someone else’s farm just to get us back to a “no loss” market.
It is tough to start out the spring with no hope. At this moment, we are committed more than our city cousins realize. This is a gut-wrenching market, and there will be a lot of stomach-cramping moments before the crop is in the bin.
