Quick Look:
- Corn and soybean prices rose on Friday after a week-long decline, with new crop corn dropping below $4.
- Farmers’ large grain stocks, spurred by a minor rally and beneficial rains, led to market oversupply and price drops.
- Despite weather issues, the market anticipates record yields, with scepticism from some experts.
- Increased export activity offers hope amid the bearish trend, particularly in China.
Corn and soybean prices finally experienced an uptick on Friday after a week that felt like an endless plunge. New crop corn prices notably dipped below $4, a significant psychological and financial threshold for farmers and traders alike. Despite sporadic daily export sales, the markets remained indifferent to the news. Mike North of ever.ag attributes this price pressure primarily to the substantial grain still held by farmers.
An Overabundance of Grain
Mike North explains that the recent quarterly grain stocks report reveals that massive grain is still on farms. As farmers prepare for the upcoming crop season, they are emptying their bins, which has led to an influx of grain into the market. A recent minor rally motivated this movement, further flooding the market with grain and driving prices down. North notes that farmer selling combined with beneficial rain in parts of the Corn Belt exerted additional downward pressure on prices, especially as critical technical levels like $4 were breached mid-week.
Yield Expectations and Market Reactions
Mark Gold of StoneX Group offers insights into current yield expectations, suggesting the market has priced in a record crop. However, Gold expresses scepticism about achieving the forecasted yields of 183 to 184 bushels per acre. He cites various weather-related issues, including drought and hail, affecting regions such as North Carolina, Kansas, Nebraska, and eastern Iowa. Despite these challenges, most of the Corn Belt appears to have a robust crop, leading to the adage “big crops get bigger.” The market has accounted for these potential yields, compounded by significant short positions of massive funds in corn and soybean contracts.
Export Sales: A Beacon of Hope
The recent price rebound raises the question of whether current prices are too low. Gold highlights that the markets only rally once farmers have sold off their old crop positions. This year began with record stocks in farmers’ bins, and while there has been substantial selling in the last 30 days, there is still more grain to be moved. This lingering supply has slowed the downward momentum but has undoubtedly made July challenging for farmers.
The Role of Technical Levels
As the market broke through key technical levels, such as the $4 mark for corn, it triggered further selling and downward pressure. This technical aspect and fundamental oversupply and weather patterns created a perfect storm for falling prices. However, Friday’s turnaround suggests prices hit a temporary floor, sparking cautious optimism among traders and farmers alike.
The Silver Lining: Export Interest
Despite the bearish trend, the price dip has increased export interest. On Friday, the USDA reported a significant daily sale of 202,000 metric tons (7.42 million bushels) of soybeans to China. This uptick in export activity provides a glimmer of hope for the markets, signalling a stabilization or even a modest rally if export demand continues to rise.
Looking Ahead
As the markets navigate these turbulent waters, the interplay between farmer selling, export demand, and yield expectations will shape price movements. The substantial short positions in the market add another layer of complexity, suggesting that any significant shift in sentiment or fundamentals could lead to rapid price adjustments. For now, the focus remains on whether the recent price floor will hold and if the renewed export interest will provide the necessary support for a sustained recovery.
While significant volatility and price declines have marked the past week, the future holds potential for stabilization and recovery, driven by export demand and the gradual clearing of farmer-held stocks. As always, the agricultural markets remain dynamic and unpredictable, with each day bringing new developments and challenges.
