Originally published in Today's Farmer

Current Market Environment

In Mid-September harvest progress continued quickly across Missouri as regional precipitation remained scarce. Corn yield reports indicate an expected statewide corn yield estimate of 181 bushels per acre- an 18.3% increase from 2023. Missouri's soybean yield is estimated at 50 bushels per acre- up from 48 bushels per acre in 2023. Large crops are expected across most of the Corn Belt states- more than enough to offset poor crops in Sun Belt states. The national average corn yield of 183.6 bushels per acre is up 6.3 bushels per acre from the previous record. US corn 2024 production estimated at 15,186 million bushels plus imports and beginning stocks of 25 and 1,812 million bushels, respectively, create a total supply in the rare air above 17,000 million bushels. With current demand expectations, ending stocks are estimated at 2,057 million bushels with an ending stock to use ratio of 13.7%. Corn prices struggle to rally when the stock to use ratio is above 12%. Similarly, the national soybean yield of 53.2 bushels per acre exceeds the 2016 record of 51.9 bushels per acre. Production estimated at 4,586 million bushels plus imports and beginning stocks of 15 and 340 million bushels, respectively, to a total supply of 4,941 million bushels. With expected total demand of 4,391 million bushel, ending stocks grow to 550 million bushels- a 12.5% stock to use ratio. A stock to use ratio above 8% is burdensome for soybeans markets. The relatively large crops will continue to put downward pressure on cash markets as elevators try to slow grain delivery and the grain handling infrastructure is stretched. Producers with grain left to sell, or more grain than they expected, are asking the familiar perennial question of "sell or store?"

To Sell or Not?

Grain marketing is an emotional process for most producers and in all of agriculture there might not be another area where "what could be" plays an outsized role. There are two stages to grain marketing- the pre-harvest period and the post-harvest period. The pre-harvest period is strategic and considers objective prices, cost of production and insurance decisions. The post-harvest period is tactical and is based on storage costs, basis values, carrying charges, and the financial health of the operation. The flow chart below illustrates these tactical decisions and poses questions to guide a producer. The questions all are objective questions and based on an individual's opinion regarding the threshold that defines a market as being high or low or large or small. Market carry for corn and beans is not the largest US producers have experienced in the last decade, but it is larger than the last couple years when prices for deferred contracts in May and July were lower than the nearby contracts. In the futures market, prices are below cost of production for most producers with cash prices even lower. As mentioned earlier, basis values across Missouri have weakened as total production has gobbled up available commercial storage capacity. Additionally, low Mississippi river water levels are increasing the cost per bushel of moving grain to export ports. This increases the cost to buyers at the port and decreases the price received by producers in the Midwest. Using the flow chart- high carrying charges and low futures points to storing grain and creating an exit plan either through selling the carry for a spring or summer deliver or establishing decision dates to price grain and avoiding large storage cost accumulation. If choosing between corn and soybeans for on-farm storage remember to consider interest expense, basis appreciation opportunities, seasonal timing for exports of each crop, and financial needs. It is estimated that corn will have a higher return to storage in 2024/25 compared to soybeans using these considerations.

In Summary

The decision to market grain at relatively low futures prices and below cost of production is difficult. Grain marketing decisions in the post-harvest period should not be based on cost of production and instead be carefully evaluated based on market conditions. Large corn and soybean supplies continue to create headwinds for grain and oilseed markets in the months ahead, but the futures market and the basis market suggest the market has more than enough grain to meet its short-term needs and is incentivizing producers to wait.