Questions like that never have a certain answer, but we can look at previous seasons when the corn surplus was heavier than usual to get an idea of what to expect. Knowing USDA is currently estimating an ending stocks-to-use ratio of 15.3% in 2023-24, I looked at cash corn prices represented by DTN’s National Corn Index the past nine seasons that the stocks-to-use ratio was 14% or more.
After mapping out prices on the first business days of November, January, March and May I show that corn prices ended higher in May than they were in January by an average of 25 cents a bushel for all nine years. The main finding that jumped out was that the bulk of the gains, an average of 14 cents, were reached by Jan. 1. Even when expressing gains in terms of percentages, over half of the 13% average gain from Nov. 1 to May 1 was achieved by early January. After Jan. 1, the slope of the increase was less dramatic. In a low interest rate environment, that wouldn’t matter as much, but when you’re paying higher storage costs and may have an operating note, time and money are ticking against you.
Since USDA is estimating the ending stocks-to-use ratio for soybeans at 5.8%, I also looked at soybean prices for the nine most recent years when stocks-to-use ratios were 7% or less, a tighter situation than corn. In this case, cash prices from DTN’s national index showed an average gain of $1.40 per bushel when held to May 1. You should also know that the results were more volatile, and two of the nine years showed losses. The largest loss was $1.01 per bushel in the drought season of 2012-13. There were also two years with gains of over $4.00 a bushel.
One of the drawbacks of the two examples above is that we can be misled by their small sample sizes. The more samples we include, the further back we go in history when conditions were much different. It is also important to recognize that Brazil has become a more ferocious competitor in corn and soybeans the past two years, and it is reasonable to expect narrower windows of opportunity for marketing both crops in the future.
Limitations aside, I do think there is a strong case here to try to be out of corn by early January, even if you are storing on your own farm and are debt-free. Big surpluses and high interest rates are not a good combination for expecting higher prices as time is not on corn’s side. As for soybeans, no one can guarantee you’ll make a return storing soybeans, but if you want to store something, store the crop with tighter supply prospects. I hear a lot of producers traditionally don’t like to store soybeans and, unfortunately, this year a lot of producers didn’t plant soybeans. This is a good time to slow down and reconsider old habits.
Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.
Todd Hultman can be reached at Todd.Hultman@dtn.com
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