Corn prices fall as supplies expected to increase

The corn bull run that started in the summer of 2020 has lost its legs, says an analyst.

December futures closed at $5.08 on May 12 following the release of a bearish World Agricultural Supply and Demand Estimates (WASDE) report.

The United States Department of Agriculture is forecasting a bloated 56.43 million tonnes of corn ending stocks in 2023-24.

“It looks like we’re heading back to the environment where corn supplies are going to be easily available again,” said DTN lead analyst Todd Hultman.

“Instead of $6 prices, we’re going to be looking at prices below $5.”

Arlan Suderman, chief commodities economist with StoneX, is even more bearish than the USDA.

He believes ending stocks will soar to 67 million tonnes by the end of 2023-24, up from 35.98 million tonnes this year.

Suderman thinks U.S. exports and domestic feed use will be much smaller than the USDA forecasts.

He feels China will not be as big of a presence as the USDA expects and scoffs at the notion that U.S. feed use will climb by 9.5 million tonnes at a time when cattle numbers are falling in that country.

The USDA is forecasting a national average farm cash price of $4.80 per bushel in 2023-24, a $1.80 drop from the previous year.

“I’m even lower at $4.35,” Suderman said in a StoneX webinar.

The corn bull run started in the summer of 2020, when the world was emerging from the global pandemic and China began buying way more of the crop than analysts expected.

The bulls got a second wind in the summer of 2022 when it became apparent that drought in the western corn belt of the U.S. was going to reduce yields.

But the market was jolted out of its bull mindset on the first day of the USDA’s Ag Outlook Forum on Feb. 23.

That is when the USDA first indicated that U.S. ending stocks could be on the rise in 2023-24. At that time, it was forecasting 48 million tonnes.

Hultman said the weather outlook for the U.S. corn belt is more favourable than it has been in years, because of the demise of La Nina.

DTN is forecasting milder temperatures and a wider dispersion of rains than last year.

“The rains we get this year won’t be confined just to eastern Iowa and Illinois like they were last year,” he said.

The USDA is forecasting improved yields and a record U.S. crop of 388 million tonnes. It is also forecasting another massive Brazilian crop of 129 million tonnes in 2023-24.

Brazil’s record 130 million tonne crop last year is the main reason the U.S. export program has been so lackluster in 2022-23.

Hultman said December corn futures prices appear reluctant to drop below $5 per bu., but he thinks they will eventually fall to $4.50 if the USDA’s production forecasts prove accurate. They haven’t been that low since the winter of 2020.

However, it is only mid-May, and a lot of bad things can still happen to corn crops in the U.S. and Brazil.

And speculators now hold a net short position in corn, so that takes some of the pressure off.

Hultman said the prospect of ample corn and soybean supplies would usually weigh down wheat prices, but the opposite happened.

July hard red winter wheat futures prices closed at $8.79 per bu. on May 12, up more than $0.35 from its previous close.

On May 15, the contract was trading above $9 for the first time since November 2022, after falling to a low of $7.38 on May 3.

The market appears to finally be acknowledging how bad the winter wheat crop is looking in the U.S. Southern Plains.

Spring wheat futures were also on the rise as of May 15, a sign that the market probably realizes there is going to be a shortage of high protein wheat in North America.

Tags: USDA, prices, yields, crop, forecast, U.S., futures, Market, China, Hard Red Winter-wheat, exports, spring wheat, corn