Have farmers really undersold 2023 corn?
There has been a lot of talk in the market this winter about farmers underselling 2023/24 corn sales. A Farm Futures grower survey conducted in January 2024 sheds some light on these cafe conversations, although it remains a difficult metric to quantify for several reasons.
First, the USDA only collects stock market data four times a year. This data is self-reported by farmers and commercial storage facilities. Measuring storage capacity is no easy feat either, as anyone who has driven through the Corn Belt in the fall knows that temporary storage can be built from scratch.
And who measures these giant piles of grain to the nearest bushel?! Having spent a large part of his career taking inventory of raw materials and finished products in cheese factories, I want to know!
Back-calculating from USDA quarterly inventory and first-supply data gives us usage estimates, which are a close indicator of crop volumes sold, although it is not a perfect calculation . These estimates suggest that 31.3% of the forecast corn consumption for 2023/24 has already occurred between September 1, 2023 and December 1, 2023, which is perfectly in line with the average of the previous 13 marketing years.
Second, discussions about the rate at which farmers sell their grain often leave out much of the context. Brokers may say farmers are “undersold,” but is that relative to the previous marketing year or a multi-year average? And does this measure include the price of bushels or just bushels delivered?
Third, and perhaps most important, crop sizes and initial supplies change each year. Farmers harvested a record corn crop in 2023, so it stands to reason that they had – and probably still have – more bushels of corn available on the market than this time last year.
Fourth (and this is more of a personal observation), you will notice that many of these conversations about farmers underselling corn cannot be traced back to measurable and/or published data. You will also notice that many of these voices have a financial interest in farmers selling their crops. We all work to make the farmer financially successful here, but I found it to be an interesting bias observing these conversations over the last couple of months.
What does the data say?
Results from the Farm Futures Grower Survey reveal that farmers are becoming more proactive in their marketing plans as prices decline after several profitable years, thanks to higher commodity prices received.
Through Dec. 31, 2023, growers told Farm Futures they have sold 61% of their 2023/24 corn crop. This represents an 8% increase from the same period a year earlier, suggesting that farmers have taken falling corn prices to heart over the past nine months and have been trying to get ahead of falling prices. .
Those who did it weren’t afraid of missing out (or FOMO, as the kids call it). May 2024 corn futures fell another $0.51/bushel (11%) through the first eight weeks of 2024, after closing 2023 down 30% ($2.06/bushel) .
Soybean prices have not fallen as sharply as corn prices in 2023, falling only 15% for the year. But falling export demand from China and a looming large harvest in Brazil led producers to ramp up their soybean sales late last year, with farmers participating in the Farm Futures survey reporting they sold 72% of their 2023/24 soybeans through December 31, up 10% from 2023/24. at the same time a year ago.
Wheat prices have seen significant erosion over the past year, particularly after Ukraine successfully transported its grain through its humanitarian corridor in the Black Sea and Russia harvested a bumper harvest. Futures contracts near Kansas City fell 27% in 2023, while soft red winter wheat contracts in Chicago lost 20% of their value during that period.
Farm Futures readers have sold 91% of their 2023/24 wheat crop by December 31, a staggering 30% more than the same period last year. This figure appears slightly higher than corn and soybeans at the same time in late December, largely because wheat is harvested earlier than those crops. But amid stiff competition in the Black Sea export market, it seems likely that U.S. wheat producers were unwilling to take unnecessary risks with post-harvest sales in late 2023.
Author’s note: Please note in these graphs that not all values add up to exactly 100%. This is due to the average of the producers’ responses. But it’s still useful for assessing trends: on-farm storage for all three major crops is lower this year and sales rates through the end of 2023 were higher. Interestingly, this year, producers are relying more on off-farm storage for corn and wheat than for soybeans.
Hedging bets
Percentage-wise, farmers are likely ahead of historic crop sales in 2023. But there are so many more bushels of corn on the market after last fall’s record harvest — especially compared to recent years — than Significant volumes of old-crop corn remain in storage before silos are emptied this summer to make way for the 2024 harvest.
Slightly higher early 2023/24 stocks are also a factor in the larger crop stocks estimated across the Heartland. Farmers participating in the recent Farm Futures survey reported holding back slightly more corn and soybeans for 2022 last fall than the previous year, which increased supply volumes.
