Economist shares marketing strategies

WEST LAFAYETTE, Ind. — Now is the time to brainstorm marketing strategies for new crop corn and soybeans, said Nathan Thompson, agricultural economics professor at Purdue University.

“There’s just been immense volatility in those markets,” he said during a webinar. “So, clearly, we’re not at the highs that we saw in the last several months. But don’t let that cloud your judgment on what a $5.43 futures price or $5.28 cash price is in terms of profitability.

“That’s certainly well above most people’s breakeven levels on corn. Just because you missed the five or six days that were at the top of the market, don’t let that mess with your mental accounting.”

If you haven’t made any moves, consider locking in at least small portions of that new crop to lock in some of those profitable levels. There’s still downside risk in corn markets, Thompson said.

There’s a 20% chance that December 2021 corn futures decline another $1 between now and expiration, he said.

When it comes to soybeans, the story is similar.

“Thinking about new crop opportunities on soybeans, we’ve kind of been pushing people to think about what those opportunities might look like,” Thompson said.

“This morning, new crop November soybeans were trading at $13.61 a bushel. Making an adjustment for basis using central Indiana, that puts us at an expected harvest cash price of $13.31.

“On one hand, that’s not as high as we’ve seen that number in the past several months. But when you compare that to breakeven, we’re still looking at very profitable levels. As you make decisions and are evaluating some of your opportunities, it’s not too late to act.”

The stock conditions on soybeans are very tight, but there’s still some downside risk on soybeans.

There’s a 33% chance that November 2021 soybean futures decline another $1 between now and expiration, Thompson said.

Corn Outlook

The U.S. Department of Agriculture released the July Crop Production and World Agricultural Supply and Demand Estimate report. James Mintert, director of the Center for Commercial Agriculture at Purdue, discussed the results.

For the 2020 corn crop balance sheet, USDA increased feed usage by about 25 million bushels. There was no change in projected export or ethanol usage.

“They reduced the projected carryover by about 25 million bushels to a total of about 1.082 billion bushels — that’s about 7.4% of usage,” Mintert said.

“They raised U.S. 2020 marketing year average corn price by a nickel to $4.40. That’s simply reflecting the relatively strong prices we’ve had this spring and summer so far.”

Looking at the 2021 balance sheet, they raised the production estimate by 175 million bushels.

“There’s no change in projected ethanol usage, still standing at about 5.2 billion bushels,” Mintert said. “They raised projected exports for the 2021 crop year by 50 million bushels to 2.5 billion bushels, about 12% below 2020 estimate, reflecting expectations for some smaller exports going to China.”

The USDA raised projected ending stocks for the end of the 2021 marketing year to 1.43 billion bushels, about 75 million bushels more than the June estimate.

Ending stocks at end of 2021 marketing year are projected to be 9.6% of usage.

“On the world side, they reduced Brazil’s current production by 5.5 million metric tons, but simultaneously raised Argentina’s estimate by about 1.5 million metric tons, compared to their estimates a month ago,” Mintert said. “No change in China’s expected imports from all sources compared to June estimates.”

Soybean Outlook

On the U.S. soybean 2020 crop balance sheet, USDA reduced estimated imports by 15 million bushels to 20 million bushels total.

“They reduced soybean crush estimate for the 2020 crop year by 5 million bushels to 2.17 billion bushels,” Mintert said. “They reduced exports by a small amount — 10 million bushels to 2.27 billion bushels.”

Carryover was left unchanged at 135 million bushels, equal to 2.9% of usage.

The U.S. 2020 marketing year average soybean price was reduced by 20 cents to $11.25 a bushel.

There were few changes on the 2021 crop balance sheet, Mintert said.

“They did lower the marketing year average soybean price projection for the ’21 crop by 15 cents to $13.70,” he said. “On the world side, no change in Brazil’s current estimated production. They reduced Argentina by 0.5 million metric tons. No change in their preliminary estimate of Brazil or Argentina’s early 2022 harvests.

“They reduced current year estimate of China’s imports by 2 million metric tons and reduced their forecast for next year’s imports by 1 million metric tons.”