As we go to press, it appears as though U.S. farmers have a chance to make history by breaking both the corn and soybean production statistics in the same year. For your neighbors who still have last year's corn and beans left, this may be a record they prefer not to see. Nevertheless, by the time you read this, the annual lows for corn and soybeans may well have already been established or are close to it.
The tables below show what can happen under average conditions, bullish and bearish for both corn and soybeans. The largest corn crop in history was 10.1 billion bushels in 1994 and the largest soybean crop was 2.74 billion bushels in 1998. What's even more significant, however, is we're going into this year with relatively large supplies and consequently the odds appear high that the stocks-to-usage ratio is going to exceed 20% in corn and 14.5% or higher in soybeans. By historical standards, these are both large numbers, making the chance of a bull market near-term very remote.
Marketing Thoughts: In making your marketing plans for corn and soybeans, here are some thoughts to keep in mind:
1) Both large and small crops are quickly discounted in prices. For example, if a huge crop, prices bottom early; if a short crop, they peak early. Supply bullish and bearish news is easily visible and fairly easy to quantify - where demand is not.
2) Large crops will thus lead to a late-season bottom for old crop and an early season bottom for new crop.
3) Basis levels will likely be the widest before harvest and then start to improve. Why? The heaviest movement of corn and soybeans this year will be just like last year - your neighbor is getting rid of the old crop to make room in the bin for a record-setting new crop.
4) If prices are still significantly low as harvest is being completed and also well below loan rate, this will likely be another year to collect LDPs early and then sit on the grain until basis levels improve in December and/or January.
Old crop: Over the past few weeks I have received many phone calls from farmers wanting to know what to tell "their neighbors" to do with old-crop corn and soybeans. Basically, the clock has run out on old-crop corn and beans and your neighbor needs to just bite the bullet and realize that he messed up one more year of marketing.
Parting thoughts: Add one more year to a record string of years starting in 1996 where income separation among farmers has been enormous. From top to bottom the spread is dramatic and mostly the result of successful vs. unsuccessful marketing. If you made mistakes along the way, put them behind you. It's difficult to make good decisions today if you're still worrying about the bad ones from yesterday. A good year lies ahead.