Dec 2024 Corn Closes Below $4

MT. JULIET, Tenn. (DTN) -- The December corn futures contract closed at $3.99 3/4 on Wednesday, breaking through the psychologically significant $4-per-bushel price level.

"These prices are getting absurd, to be honest, from a fundamental viewpoint," DTN Lead Analyst Todd Hultman said.

It's the lowest closing price since November 2020, yet production costs have surged 29%.

"So, if you look at the equivalent, this is like at $3.10 price back in 2020 and most of those pre-COVID years," Hultman said. "In fact, in 2020, we didn't even get to $3.10 per bushel in the December contract. Our low was $3.20, so this is extraordinarily cheap."

Hultman said the market recognizes the bargain. Ethanol production set a new record last week, according to Energy Department data, and total production for the year is 3.7% higher than in 2023.

Export sales are up 37% from a year ago, and shipments remain on track to hit USDA's 2.225-billion-bushel estimate. The U.S. FOB (free on board) price is cheaper than Brazil and Ukraine, and only $2 per metric ton higher than Argentina. FOB prices reflect the costs included in delivering grain to the destination and are an indication of how competitive prices of the same commodity are from different origins.

Basis, which measures the difference between cash prices paid to the farmer and the futures price, is the fourth strongest in the past 10 years, which Hultman said is strong for a market that's expecting a 2-billion-bushel surplus.

"In the counties that have heavy livestock numbers, the basis is even stronger. So, feed demand looks very good to me," he said. "In spite of all that good demand news, it seems that the funds remain focused on the fairly good forecast we have ahead of us."

Managed funds, a type of noncommercial or speculative trader, hold a heavy net short position that's propelled corn prices downward.

Overall, Hultman said USDA's estimate of a 15.1-billion-bushel corn crop is probably close to where it'll end up, but this growing season has also seen a lot of severe weather that probably hasn't been fully accounted for.

"Our perception of this year's crop still has room to change," he said.

Hultman likes to compare supply levels to stocks-to-use ratios. By that measure, he estimates the market is oversupplied by about 300 million bushels, "meaning that if we have 300 million bushels less corn, we'd probably be looking at an ending stocks level that roughly supports a breakeven price. We could easily have that much swing just learning about this crop."

USDA will update its planted and harvested acreage estimates in the August report and will begin including field-level data in September, which would be more likely to reflect greensnap caused by the derecho, damages from heavy early season rains and the widespread reports of hail damage across the Corn Belt.

Hultman said it would probably take a major weather event to scare funds out of their short positions. A hotter and drier forecast in the critical pod and grain fill stages could do it, but right now, the forecast is calling for a shot of cool air next week. It could be more variable later in the month, as DTN Ag Meteorologist John Baranick wrote here: https://www.dtnpf.com/….

"The forecast for August is so up and down, it's like a coin flip. There's no strong confidence in either direction," Hultman said.

While funds may be holding prices down, there's no indication farmers are caving to pressure.

"The market's in a tough spot right now," Hultman said.

For more on old-crop corn supplies, please read: https://www.dtnpf.com/….

Katie Dehlinger can be reached at katie.dehlinger@dtn.com

Follow her on social platform X at @KatieD_DTN

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