Lack of demand? Stay defensive

What happened in the market

Demand. Demand. Demand. Or lack thereof. That is the other side of the marketing equation we often lose sight of, especially when there are crops drying out in one part of the corn belt and flooding in another.

The crop ratings are well above last year’s, and expectations for acres and production are up as well, despite less-than-ideal planting conditions. The trade is looking at the glass half full right now and not wanting to add in any weather premium.

USDA released quarterly grain stocks and acreage data with trade expectations in the charts below. Stocks numbers are higher than last year due to lack of demand because of competition from South America and an overall decline in purchases by China. Acreage data is much higher for corn than anticipated and a bit lower than expected for soybeans. 

U.S. quarterly stocks, as of June 1, 2024 (in billions of bushels)

	USDA June 1 estimate	Average of analysts’ estimates	Range of analysts’ estimates	USDA March 1, 2024	USDA June 3, 2024
Wheat	702	0.684	0.644-0.705	1.087	0.570
Corn	4.990	4.873	4.675-5.013	8.347	4.103
Soybeans	970	0.962	0.861-1.015	1.845	0.796

From Reuters News

U.S. plantings of major crops for 2024 harvest (in millions of acres)

	USDA June 28 estimate	Average of analysts’ estimates	Range of analysts’ estimates	USDA March 28 figures	USDA 32023 final figures
Corn	91.5	90.353	89.000-91.300	90.036	94.641
Soybeans	86.1	86.753	85.500-87.500	86.510	83.600
All wheat	47.2	47.657	47.100-49.000	47.498	49.575

From a marketing perspective

The markets sold off hard in June, taking out multi-year lows. Producers were hopeful for a summer weather market to finish making old crop sales, but it never materialized. This left them no choice but to hold on or throw in the towel.

We turn the calendar and head into the Fourth of July, which in some years has allowed the markets one last rally attempt. We’ll see if that will be the case this year. If nothing happens, production concerns may not show up until after harvest. It will allow markets to continue their slow bleed toward $4 in corn, maybe $10.50 or lower in soybeans, and toward $5 for wheat.

Prepare yourself

Stay defensive with hedges in place and consider adding to those hedges should recent lows be taken out. Even from these levels, there could be an additional:

• 50¢ downside risk in corn
• 50¢ to a dollar risk lower in beans
• 50¢ or more in wheat

Use any rally attempts as selling opportunities for what you still are holding, and for the crop in the field. You could even get started on next year’s crop. There may be reasons for call option buying for late summer weather or for a post-harvest rally. Keep a close eye in case of a weather development in South America or if U.S. crops are not as fruitful as trade is expecting.

If you have questions, you can reach Cathy at cekstrand@s-pelmwood.com or visit www.TotalFarmMarketing.com for more information. 

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