Todd's Take

A Cautionary Tale for Corn and Soybean Prices From 1992

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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This illustration, taken from USDA's Crop Production report of July 9, 1992, shows Illinois and nearby areas in moderate to severe drought in late June, bad enough to give Illinois corn a 28% good-to-excellent rating and Illinois soybeans a 30% rating on June 14. Despite the poor start, you might be surprised to hear how the year ended. (USDA illustration).

As DTN Meteorologist John Baranick described in DTN's June 21 Ag Weather Forum (… ) the more crop-beneficial influence from El Nino has been delayed and the result has been a drier-than-expected pattern in the Midwest. The conditions holding back El Nino influences are changing, Baranick said, and more thunderstorms should start coming through; but there will continue to be haves and have-nots. As Baranick wrote, "... models tend to suggest that more areas will receive below-normal rainfall, even in this more-active pattern." In short, crop conditions and 2023 yields remain at risk.

As I was sifting through USDA's good-to-excellent crop ratings on Tuesday afternoon, June 20, I gasped to see Illinois corn drop to 36% and soybeans drop to 33%. More importantly in my book, USDA reported 83% of Illinois had inadequate subsoil moisture, second only to Michigan's 89%. I wondered how far back I had to go to find lower Illinois crop ratings for this time of year and it didn't take long for ProphetX to give me the answer. On June 14, 1992, 28% of Illinois corn and 30% of Illinois soybeans were rated good to excellent.

I was a broker in Omaha at the time and don't recall anything that stood out about that year, so I'd be interested in hearing any recollections readers might have, especially if you were farming near Illinois. Curious to know more, USDA's Crop Production report from July 9, 1992, explained that after a dry May, corn crop planting was "nearly complete entering June," and soybean planting was "well along." Some Eastern Corn Belt areas around the Great Lakes encountered freeze damage in the week starting June 22. A map dated June 27 showed an area of severe drought covering most of Illinois and surrounding areas, including part of eastern Iowa.

The year ended with both Illinois and the U.S. producing record corn and soybean yields. The line from the July Weather Summary in USDA's August report explained, "Drought broke dramatically across the Corn Belt during July ..." The good-to-excellent rating in corn that was 28% in mid-June was 94% by the end of September. Soybeans' 30% rating was 88% at the end of September.

I don't tell the story above because I think we're headed to record yields again in 2023, but to remind us of the wide range of possibilities that still exist this early in the 2023-24 season. In 2023, the drought is much more threatening, more widespread throughout the entire Midwest and comes on the heels of a previous dry year for many in the Corn Belt. I'm also influenced by the U.S. Seasonal Drought Outlook issued by the National Oceanic and Atmospheric Administration on June 15, expecting drought to persist in many of the Midwest's highest yielding areas through the end of September, an outlook that DTN's weather team generally agrees with.

In terms of risk management, I'll go back to my poker analogy and say again that the lessons of this year and 1992 have been to not bet too heavily before the cards are on the table. I'm comfortable with the 50% forward sales of corn and soybeans we recommended in February and March, knowing they were pretty good prices, but am in no hurry to make more sales yet. It makes me cringe whenever I hear someone recommending several years' worth of forward sales -- a far more dangerous bet to handle when the weather turns bad.

We've got USDA's Acreage and Grain Stocks reports coming up on June 30, two important reports that often produce big price moves. We also have the month of July to learn more about pollination conditions. Weather markets are showing their volatility but, so far, the price trends of corn and soybeans are pointed up and have the protection of crop insurance below. This seems like a good time to let the market work for us as we keep learning more about 2023.


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.

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Todd Hultman