At a late-winter meeting in Iowa, a customer asked me several questions: “First, I know that May and June are usually good months to make sales. But can you be more specific? Which weeks? Also, what if the weather is good? How low can corn and beans go?” I said I would suggest some key weeks, but not the time of day! For his question about pricing, I showed him some of my historic charts that I use to project a price range of how low new-crop prices can go.
Longtime readers know I make seasonal sale recommendations. This simple concept works well. I suggest making corn and soy-bean sales in May and June while avoiding sales from August through October. This has worked in 30 of the past 40 years. As we enter May and June, I have most of my customers 60% to 80% sold on the 2022 corn and soybean crops. One simple marketing plan is to sell 5% to 15% of your cash crop each week starting the first week of May. On any week when corn is up more than 15¢ (or if soybeans are up more than 40¢), you make two sales.
If you want to fine-tune the seasonal plan, then watch a few key weeks during the next two months. The first key week (actually the key day) is May 12: the day the futures contracts expire for May corn and soybeans. At the time I am writing this, May corn is trading at a 27¢ premium to the July contract, and May soybeans are trading at a 28¢ premium to the July contract. This is likely to create a spike high on my daily and weekly corn and soybean charts.
In 2023, May 12 is also the day of the major monthly USDA supply/demand re-port. The USDA reports have created some extreme price moves in the past few months. The May 12 report is important because it provides the USDA outlook through the 2023/2024 marketing year.
The other key weeks I will be watching are the week of May 26 (just before the three-day Memorial Day holiday), the week of June 16, and the week of June 30. The third week of June is always a key change-of-trend week. The week of June 30 is when USDA re-leases the annual (and major) Acreage and quarterly Grain Stocks reports. Because of these special reports, the last day of June has a history of creating extreme volatility. After I went through my list of key weeks, my customer raised his hand and said he was just going to go with my simple weekly sales plan. I told him any plan is better than “hold and hope.”
When you are putting together a plan to sell the last of your cash corn and soybeans, be fully aware of the risk of storing too long. When you are done reading this article, call or check the website of the elevator where you do business. Write down what the cash bid is for delivery this week and for July, August, and October. You will see how much lower prices are if you hold for another 30 to 90 days. You need to fully recognize the financial risk of holding too long.
Another way to get the crop sold is to set a revenue goal. I prefer to set a goal of so many dollars per acre. If you consider last year’s yield and today’s cash prices, most farmers are at a good or great profit level. Do you have a target of having the last cash sales push you past $1,400 per acre for your 2022 corn or over $1,000 per acre for your 2022 soybeans?
A good way to get the next generation involved in your operation is to let each one market the last 5,000 to 10,000 bushels of corn or 1,000 to 3,000 bushels of soybeans. The one who does the best job gets bragging rights and maybe tickets to a sporting event or concert. Also ask about their decision-making involved in the sales. You will be amazed at how much more attention they will pay to the day-to-day market changes. Letting them market some bushels makes them look at the crop differently. It’s not just corn and soybeans. It is real money. Again, any plan is better than the “hold and hope” plan.
This chart showing the premium of July corn to December corn going back to 2016 illustrates why it is important not to store cash corn too long. From 2016 to 2019, the July premium to December was usually above 20¢. Since then, it has traded as much as $1.20 to more than $1.50 per bushel over. This year the spread is at just over 70¢.
A tougher and more complex question is: How low can new-crop 2023 corn and soybean prices go? For December corn, the first level of support I look at is the July 2022 low ($5.42), then the fall 2021 low ($4.62). Unless we are in a severe global recession in 2023, I do not think the $4.62 level is likely. If December 2023 corn futures do drop to $4.60 to $4.80, I do not believe they will stay at that depressed price long.
For soybeans, the July 2022 low for November 2023 soybeans is $12.17. This is initial support with additional support at the October 2021 low ($11.54). The U.S. and global fundamentals are much better for soybeans than corn, so I do not think a return to $11.54 is realistic. If November 2023 soybean futures drop below $12.00, I do not expect them to stay at that depressed price for very long.
This chart showing the premium of July soybeans to November soybeans going back to 2016 illustrates why it is important not to store cash soybeans into August. From 2016 to 2019, the July premium to December was usually between 40¢ to 60¢. In the past few years, it has traded as much as $2.00 to nearly $2.40 per bushel over. This year the spread is slightly more than $1.60 per bushel.
Have a seasonal sense of timing instead of focusing on low prices. Make a marketing plan that avoids selling any corn or soybeans between August and October. That is more important than trying to speculate how low prices can go. With the December corn and November soybeans trading at a huge discount to the May and July 2023 contracts, much of the “larger crop” is already built into the new-crop futures prices.
Note: The risk of loss in trading futures and/or options is substantial, and each investor and/or trader must consider whether this is a suitable investment. Past performance — whether actual or indicated by simulated historical tests of strategies — is not indicative of future results. Trading advice reflects good-faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice given will result in profitable trades.