The biggest risk for someone writing opinions about grain markets is that, by the time the opinions are printed and mailed, the world can change. You can be a hero or a zero in short notice.
So, last week I made a big deal that corn market highs come in June, and June was about to end. As you read this, it is now July, and, yes, the world did change.
This week, the market was hit with fundamental issues that have shattered some assumptions about the corn and soybean markets. The issues came as a result of the U.S. Department of Agriculture reports out June 30, and as a result of a huge weather event June 29.
Derecho
A large section of the Central and Eastern Corn Belt was hit with a “derecho” June 29. You haven’t seen that word since the big one hit Iowa in August 2020. It is defined as a long-distance, straight-line windstorm, with winds over 58 miles per hour (odd number— probably even in metric).
This one lasted eight hours, starting in southeast Nebraska and northeast Kansas and traveling all the way into Indiana. Winds were sustained at over 80 mph, and had long spells over 90 mph. The results have been photographed, but the results on yields are unknown, but serious.
The pictures and accounts I have seen detail damage that is recoverable. That is, the Iowa derecho that made our markets boom at the end of the 2020 summer was characterized by corn that was broken off. This seems to have left much of the corn bent to the ground, but not broken. In other words, instead of zero yield in a lot of farms, there will be yield-reducing damage that is not, at this moment, quantifiable.
The derecho was a mixed blessing. That is, along with it came more than an inch of rain over a large area of very dry farm land. So, the corn that was not damaged or that recovers has been given a new lease on life.
Grain report
Then, June 30, we got the grain stocks report from the USDA, and also some interesting data about this year’s crops from the June acreage report. Amazingly, the USDA raised its estimate of planted corn acres by 2.2 million, to 94.1 million acres.
This was a total shock to the market, which promptly tanked. Corn futures were down from 28 to 35 cents after the report. In other words, we traded the USDA news and ignored the derecho.
Perhaps the net result of the storm, given the rain, was not positive if the acres just got increased. It should be noted that the average guess by the big traders going into the report was for NO CHANGE! The highest guess, which seemed impossible, was for 93 million. Jim Nabors comes to mind: “Surprise, surprise!”
Soybeans
Then, there was the other market. The soybeans, which were not blown over, were estimated by USDA in the same report to have fewer acres. That makes sense. The ground got planted to one or the other.
This cut was even worse. The USDA reported an estimate of 83.5 million acres, down FOUR MILLION ACRES! The trade had expected a gain of acres of 300,000. The lowest guess was for a cut of 500,000 acres.
This huge change in acres pumped the soybeans up from 44 cents on the nearby to 77 1/2 cents on the November contract.
Almost lost in the report were the actual grain stocks numbers. Corn stocks were below expectations, at 4.106 billion bushels June 1. The soybean stocks came in at 795.6 million bushels, down from 967.5 for this time last year. This soybean number was not a shock, as the trade expected 805 million.
Moving forward
So, where do we go from here? We still don’t know what the crop damage is from the storm, but everything else in the weather and the USDA points to a big crop.
We are not that far from tasseling, so a couple more good rains could get us through the worry period for corn. The damage from the storm, if we react normally, will turn out in September to be a lot less than we thought July 3. What a difference a week makes! That song is going around in my head — “What a difference a day makes, twenty-four little hours!”
Let’s put numbers on this mess. On June 21, we had a high of $6.29 3/4 for December corn futures. We had a low June 30 of $4.93, which was a loss of 33 3/4 cents for the day. That is a range of $1.36 3/4. The net is that we lost 27 cents on December futures in the month of June, just when corn was looking like a good price.
Meanwhile, soybean prices gained almost $2 in June! November futures gained 77 1/2 cents June 30, to $13.68. The soybeans made a high June 21, like corn. The November futures hit $13.89 that day, so the action June 30 got us back near the recent high.
Conclusion: the soybean rally is still on, the corn rally has been killed. I hope you sold corn last week. This week is the time to get a big chunk of beans sold.
