Jon Scheve with weekly market commentary made on March 15, 2024
Some market participants are saying the near-term lows for corn may be behind us for now. They point to this recent 30-cent corn rally, after two months of significant price decline, as evidence. They go on to say corn could rally further into spring from weather issues, plus there is a 30-year average trend that shows corn usually rallies from March into June.
While I hope these predictions are right, I’m concerned that they may not be. The following charts compare December 2024 corn futures prices for the calendar year so far to other marketing years.
Years With Tight Carryout – Higher Prices Were Necessary to Ration Demand
So far, 2024 is not behaving like the years in this chart. This could be because there is a large carryout right now, unlike the other years in this group.
Years With Large Carryout – December Prices Started Much Lower Than Where It Is Currently Trading
The marketing years of 2016, 2017, and 2018 followed years with large carryout and had above trendline yields. In 2019 there was trade war and 2020 had a big drop in prices because of covid.
2024 started at much higher values than any of these marketing years and it seems to be in a different type of trading pattern as well.
Years When the Market Was Weak from January to June - Before A Weather Scare Spurred a Significant Rally
In these years, prices continued to drop significantly during a time when historically markets tend to rally from March until June.
It seems as if 2024 might be following the market directions from these years more closely than other years noted in the above charts. This could indicate that corn could still slide lower, unless there is a big weather issue.
Even in 2010 and 2012 the market continued to trade lower from March into June before reversing direction and trading significantly higher than where the futures were in March.
Comparing A Similar Looking Chart Pattern Year
One year that looks like 2024 is 2009:
But I’m not sure 2009 is a great example to compare because the ethanol boom was just getting underway. Additionally, in 2009 planted corn acres intentions were not higher than what was planted in 2008. This lead to the market wanting and needing more corn acres, and it caused prices to rally from March to June to try and buy those additional acres.
The Market Does NOT Want More Corn Acres
This year, the market is not trying to buy corn acres, it is trying to lose them. There are indications some corn acres in the south are moving to cotton or rice. But some reports in the north suggest that some spring wheat, oats, and sunflower acres may switch back to corn as those other crops do not look as profitable as they once did.
With the soybean prices falling over the past couple of months there could be some last-minute switching of those acres to corn as well pending fertilizer prices. It could all mean that the market is left with too many corn acres potentially. That could lead to prices falling to discourage more acres being planted this spring.
Weather Is Always a Wildcard
Brazil continues to be a big corn export competitor to the US, and their second crop was just planted a few weeks ago. This means they will need normal rain throughout April and early May to finish the crop out. If Mato Grosso and the surrounding areas are drier than average, corn upside potential is possible.
Another possible issue to watch is if both April and May are extremely wet in the US like they were in 2019. And finally, if in late June and early July the weather turns dry in the US then a market rally is of course possible.
Unfortunately, trying to forecast the weather more than two weeks out remains difficult let alone 2 months out which is impossible. Because weather is impossible to predict futures prices predicting is impossible too. That is why it is important to have risk management strategies in place.
Jon Scheve
Superior Feed Ingredients, LLC
9358 Oak Ave
Waconia, MN 55387
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