Todd's Take                   04/19 06:19

   Getting Perspective on 2024 New-Crop Corn Prices

   Input prices and the value of the dollar have changed in the past few years 
since COVID arrived. A little math may help regain some perspective on new-crop 
corn prices in 2024.

Todd Hultman
DTN Lead Analyst

   On Thursday, April 18, 2024, December corn closed at $4.60 a bushel, near 
its lowest level of the past three years. Over the past 50 years, there have 
been eight times when the price of December corn was this high in April. But of 
course, the value of a dollar has changed a lot in 50 years. Nothing stays the 
same.

   That has been especially true for the past four years. In 2020, COVID-19 
arrived and turned the world upside down. Many of us stayed close to home and 
gasoline demand plummeted. 2020 will long be remembered as the year in which 
the price of crude oil fell to -$40.32 a barrel, a price many of us never 
thought we'd see in our lifetimes. Later in 2020, DTN's U.S. average price of 
anhydrous hit a low of $422 a ton, then soared to over $1,500 a ton by the 
spring of 2022, a price we hoped we'd never see.

   December corn prices were also turbulent after 2020. In the five years 
before 2020, December corn traded in a stable range between roughly $3.15 and 
$4.50 a bushel. After hitting a low of $3 in April 2020, prices soared to a 
peak of $7.75 a bushel in 2021 and a second peak of $8.27 in 2022. Compared to 
those two years, Thursday's December corn price of $4.60 isn't looking so hot.

   One of the problems of going through a volatile time like the past four 
years is that it's easy to lose our bearings. With USDA estimating U.S. corn 
ending stocks at 2.122 billion bushels (bb) in 2023-24 and looking ahead to the 
possibility of a larger surplus in 2024-25, today's supply situation compares 
well to the five years of similar U.S. corn surpluses before 2020's upheaval. 
The purchasing power of the dollar is lower, or we could say input costs are 
higher and interest rates are also higher.

   To get a more grounded sense of today's prices, I find it helpful to compare 
to USDA's estimates of production costs. For example, from 2015 to 2020, USDA's 
estimated production cost for growing corn averaged $680 an acre. USDA's most 
recent cost estimate for 2024 is $870 an acre, a 28% increase from the years 
when ending supplies were similar to today and December corn prices traded 
roughly between $3.15 and $4.50 a bushel.

   If we divide Thursday's $4.60 price by 1.28, we get $3.59 a bushel, a price 
that used to be at the lower end of the old trading range. The other factor to 
notice is how commercials tended to turn net long in the market, when corn 
prices got near the low end of the trading range -- exactly what we would 
expect from the market segment that knows value best. I can't guarantee corn 
prices will go higher from here, but it is interesting to see commercials have 
been turning consistently net long since August 2023, and positions peaked in 
late February, when the price of December corn reached its pre-COVID equivalent 
of $3.48 1/2 a bushel.

   A similar comparison for soybeans finds USDA estimating the cost of 
production at $615 an acre in 2024, up 30% from the previous period of 2015 to 
2020. Thursday's close of $11.49 1/4 in November soybeans is the equivalent of 
$8.84 a bushel before COVID, a cheap price that was most often reached during 
the tariff dispute with China. USDA's latest estimate of U.S. ending soybean 
stocks in 2023-24 is 340 million bushels (mb), or 8.3% of annual use. That is 
not the kind of heavy supply scenario we would normally expect for a price that 
cheap.

   The cost comparisons described above are best used to give us a rough idea 
of where prices might trade in 2024. But as you should know, there are no 
guarantees the same fundamental valuations will hold true in 2024. As we speak, 
it is looking like South American corn production will be modestly lower in 
2024, but soybean production will be higher, somewhere near 7.3 bb or more.

   I can't guarantee future prices but given the volatility corn and soybean 
prices have seen the past four years, I would say there is a chance current 
new-crop prices of corn and soybeans are nearing long-term support. Thursday's 
new one-month lows in corn and soybean prices don't make me confident about 
being bullish yet. But solid closes above the highs of March, if they happened, 
would certainly make prospects for 2024 prices much more interesting.

   **

   Comments above are for educational purposes only and are not meant as 
specific trade recommendations. The buying and selling of grain or grain 
futures or options involve substantial risk and are not suitable for everyone.

   Todd Hultman can be reached at Todd.Hultman@dtn.com.

   Follow him on social platform X @ToddHultman1.




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