Continued dry weather has put a damper on the growing season.
Nearly all of Iowa, Illinois and Missouri reside in some form of drought, according to the July 27 U.S. Drought Monitor. That has raised questions as to what prices will look like come harvest time and the best way to sell the rest of the crop.
“I talked to an Iowa client (in late July) who said he can’t sell any more corn at this point because ‘I don’t know what I’m going to have,’” said Mike Zuzolo of Global Commodity Analytics. “It’s very hard for me to expect we will reach last year’s yield number in corn. We may not even get better than 2019.”
Zuzolo said according to data he’s seen, the Corn Belt is in nearly the same stress index as it was at this point last year. But with drought being cumulative, it is likely to take a toll on many areas.
For those who are unsure about their options for the harvest season and what their crop might look like, Zuzolo said getting a good floor with put options for the September or December contracts might be the best course of action.
“The markets should be transitioning from selling rallies aggressively to buying dips, Zuzolo said. “I like being 100% hedged on insured bushels and I’m ready to do that on soybeans too. However, 70% of that is going to be with bought puts.”
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The end of July also brought a significant heat wave through much of the Midwest, with temperatures approaching or eclipsing 100 degrees Fahrenheit. That weather brought some storms, but no signs of what he called “organized systems.”
One of the surprises in the corn market was the July 24 crop conditions, which didn’t show a decline in good-to-excellent ratings. The early August reports, after much of the pollination is complete, will give a clearer picture, said Brian Anderson of Stewart-Peterson trading.
“Our expected average yield is about 4 bushels per acre below the USDA expectation,” Anderson said. “It will be interesting to see which direction we go, but if the USDA numbers go lower, prices should rise.”
Soybean futures have been on the rise in recent weeks, particularly in the product market. Zuzolo said the Chinese economy has helped soy prices as their hog markets start to ramp back up.
“The soy market has had bean oil trade to help it out, and the baton is being handed off to the meal market,” Zuzolo said.
While yield will be one of the most important factors for price moving forward, volatility is expected to continue with news out of the Black Sea region. The Russian war on Ukraine appears to be escalating, and the expiration of the Black Sea Grain Deal leaves a lot of uncertainty for those who are looking to predict the market.
“The futures market continues to grapple with just how much grain Ukraine will be able to export,” Zuzolo said. “Their only supply route appears to be through eastern Europe via truck or rail transport.”
That is likely to significantly impact corn prices as Ukraine is typically a strong exporter of corn.
