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Have grain prices peaked?

With the addition of a new three-day weekend to the holiday calendar this year, we now have three three-day weekends in six weeks, right when agricultural commodities are typically making seasonal highs. Three-day weekends have not been the friend of agricultural producers this year. Good thing we won’t have another one until September when grains are usually at or near the “fall slump”.

In the case of December corn, the first session coming off the last three holiday weekends added 77 cents to the price drop, or an average of 25.75 cents per session.

The sheer scale of the decline is not surprising given the history of previous breaks from similar price levels. In February, 2008 had a similar setup and we cautioned that once peaking the potential grain downside should not be underestimated.

A look back in time

In the spirit of using history as a potential guide of things to come, I think it’s appropriate to look back at another year that made major highs: 2012. The lesson here is not so much geared towards what to expect for the rest of the period. Agreements for 2022, but to think more about the implications ahead in 2023.

The 2012 drought drove spot corn and soybeans to record high prices that remain intact today. The 2012 rally also copied contract highs over the next several crop years; This was an opportunity to sell more than one marketing year of production.

December 2013 corn contracted for $6.65 in the summer of 2012, while December 2023 corn has contracted for $6.7925 so far. The cautionary tale here is that the December 2013 contract did not see values ​​above $6, once it broke that price level to the downside, for the remainder of the contract’s life (eleven months). The highest price seen in the summer of 2013 was $5.735 for the December 2013 contract.

What if a contract with a 20+ consecutive day string of gains when traders fixate on inflation turns into a contract that traders want to sell during rallies as they fixate on recession? The December 2013 contract fell as low as $4.10 before expiration. Rallies now appear to be selling opportunities for 2023 contracts.

In the short term, grains are oversold and must find reasons to rally from current levels. December 2022 Corn has retraced half of its rally from the 2020 contract low to the 2022 contract high. Yes, half of the two-year rally is gone within two months. November 2022 soybeans found themselves more than $2 off their highs just three sessions ago and are likely the contract to take the most gains in next week’s WASDE report.

July WASDE Report

Ahead of the report, USDA will use last week’s acreage number, which reduces soybean production by about 130 million bushels from the number used in the June WASDE report. USDA is forced to reduce demand by roughly 50mb to keep the carryout from falling below just 200mb, while they are still using the assumption of a record soybean yield, which has its own hurdles.

Any yield cuts moving forward will bring dangerously heavy shipments into the pipeline without further demand offsets. This scenario should support things for the next few weeks as we approach August, unless outside markets continue to provide liquidity pressure.

Build a marketing strategy

Just over a month ago, the blog ended with a strategy any producer can implement to secure a solid worst-case scenario for 2023 corn values ​​as we head into winter, during which spring price averages are set for revenue guarantees. Advisers have half their 2023 corn crop at $6 while futures are currently near $5.50. Not a bad place to be.

As always, if you need any help selling your crop, feel free to contact me directly at 815-665-0463 or anyone on the AgMarket.Net team at 844-4AGMRKT. We are here to help.

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