It’s no secret that corn and soybean prices are sharply lower in the past 12 weeks. Corn and soybeans have lost nearly a third of its value since early May. In southern Minnesota, corn that was worth $4.50/bu. in early May is closer to $3.10/bu. today. Soybeans that were worth $14.40/bu. in late May are now worth $10.50/bu. Weather has been favorable and, assuming we don’t have an early frost, the chances are good that prices will stay low through harvest.
I suspect that the favorite marketing ploy at harvest will be to store the grain (as much as possible) and wait for better prices after harvest and into the spring of 2015. So, what are the prospects for higher prices next spring?
My analysis looked at years since 1990, when Minnesota monthly corn prices (as reported by NASS) fell significantly from spring to harvest. By significant, I mean tears when prices fell at least twice as much, on a percentage basis, as a “normal” decline from spring to harvest.
For Minnesota corn, I found 9 years when the price at harvest was at least 17% lower than they were in the previous May (planting season): 1990 (-17%), 1992 (-19%), 1994 (-18%), 1996 (-25%), 1998 (-25%), 1999 (-20%), 2000 (-18%), 2004 (-21%), and 2013 (-24%). For the record, if Minnesota corn prices are at $3.00/bu. at harvest, that will represent a 32% decline from the average price of $4.43/bu. in May – a larger decline than all of the years considered here. What do all of these years have in common (beyond the price decrease)? In each of these years – like 2014 – the corn market was building larger ending stocks.
How did prices behave after harvest in each of these years? Keep in mind that there is a strong seasonal tendency for cash corn prices to rise from October (harvest) to the following May (spring). In Minnesota, the price in May is higher than the previous harvest price in 3 out of 4 years (75%), with an average price increase of 12%. In the nine years cited here – years similar to the current year in terms of building stocks and sharply lower prices – prices increased in 2 of 3 years (67%), but the average increase in price was only 4%. A 4% increase, applied to a $3/bu. price at harvest, has us looking forward to $3.12/bu. corn next spring. Ouch.
For Minnesota soybeans, I found 7 years when the price at harvest was at least 14% lower than they were in the previous May: 1994 (-22%), 1997 (-23%), 1998 (-17%), 2000 (-14%), 2004 (-42%), 2008 (-18%), and 2013 (-16%). If Minnesota soybean prices are at $10.00/bu. at harvest, that will represent a 31% decline from the average price of $14.40/bu. in May – a decline larger than all years except 2004. Again, like corn, in each of these years the soybean market was building larger ending stocks.
How did prices behave after harvest in each of these years? Like corn, there is a strong seasonal tendency for cash soybean prices to rise from October (harvest) to the following May (spring). In Minnesota, the soybean price in May is higher than the previous harvest price in almost 4 out of 5 years (79%), with an average price increase of 13%. In the seven years noted here, prices increased in 4 years (57%), and the average price increase was a mere 3%. A 3% increase, applied to a $10/bu. price at harvest, has us looking forward to $10.30/bu. soybeans next spring. Another ouch.
What are the prospects for higher corn and soybean prices next spring? Not very good.