Fundamentally Speaking

At the USDA data users meeting earlier this month a comment was made that the on-farm price forecast for corn looked out of whack based on the then current central Illinois prices of around $5.50 per bushel and USDA's season average price at $4.30 per bushel, but like soybeans, much of the crop was marketed earlier in the crop year when prices were lower.

The point is producers have already moved a lot of their 2020 corn and soybean harvests.

Even though they sold at some of the highest values in years, farmers still think they left a lot of money on the table so coaxing the last of their 2020 supplies out of their hands is going to be incredibly difficult keeping spreads, basis and cash markets firm until they have greater confidence about good output prospects this season.

This may also result in producers moving away from their typical marketing patterns where a large bulk of their crops are sold early in the year, right after harvest when prices are usually the lowest.

For the 2021/22 year, remembering how they sold too much too soon, the fact that they have plenty of bin space and cash to hold off from early season sales and ideas that the current lofty prices may be with us for a while could make them relatively tight fisted for a while.

This graphic shows the average percent of U.S. corn marketed by month on the left-hand axis vs. the seasonality of cash corn prices received by U.S. farmers on the right-hand axis using data from the 2000/01 to 2019/20 seasons.

On average farmers sell about 25% of their crop in October and November when prices are about 5% below the seasonal average and market only half of that volume in May and June when prices are about 4% above the yearly average value.

Note that a large amount of corn is marketing in the month of January, for tax purposes and the need to generate cash for the upcoming planting season, but January prices tend to be still just below the average price for the year.

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