This is definitely an ugly time in the grain markets. Last week’s USDA forecasts were very bearish. This report indicated a huge crop that is nearing harvest along with big supplies of last years crop still on hand. The amount of farmers selling currently remains high, as producers are trying to open up bin space for the coming harvest. This, by itself, has been very negative to the markets. This selling pressure should slow after Labor Day but as of yet we have not seen any reductions thus, putting basis pressure on the market.
This year we have seen considerable strength in the dollar this in turn is making our exports more expensive to the world market. However, this has begun to change as the dollar has eroded in value over the last several weeks. If the Feds lower interest rates, there will be increased pressure on the dollar to go lower, making our exports more cost effective to the rest of the world. It is very likely that the Feds will make a quarter point interest rate reduction this fall, but beyond that it remains only a guess.
Corn harvest is starting in the Midwest. The USDA estimates that the average yield for this crop will come in at a whopping 183.5 bu per acre. This will amount to a carry over of about 2.2 billion bushels. That number is significant. With that much carry over it could hamper prices for the next couple of years without a big increase in demand. Each year Brazil adds new acres due to deforestation and this year was no different with about a 3% increase in cropland acres. At the time of this writing, South America is beginning a new planting season, which with normal weather will supply more bushels to the world market than the United States will.
Soybeans will be a big crop as well. The UDSA is estimating an average yield of 53.2b u per acre with some analysts’ guesses even exceeding that. Last year there was a lot of hype about the use of soybeans as a renewable fuel, however this market hasn’t yet materialized as some expected it to. One analyst stated that the trend is still down with little support until beans are near the $8 dollar level. I know that many producers took advantage of the prices this spring and forward priced beans at over $12. In hindsight, this was a great marketing strategy.
When writing marketing articles, I always try to find something positive to look forward to. In this article that task has become very hard. Political unrest and wars may change the markets to a degree, but no war or political unrest is positive news. Weather will, in time, negate some of the big supplies, but there again that is not going to be immediate with the large supplies we have on hand. It may likely be in the 2026 crop year before we can see a positive turn around.
The cattle markets have also been under recent pressure with price declines in both feds and feeders of over $20/cwt this summer. This however may be a short term adjustment. The cattle supply remains low and when expansion starts, it will pull additional breeding stock out of the supply chain thus further reducing supplies and raising prices. Many analysts expect some weakness through the end of the year then followed with some positive price action by the first quarter of 2025. Demand will remain the key to seeing if this scenario plays out. The resilience of demand has been very good thus far with only small substitution of products being observed in the market place.
This is a tough year as I personally know of several young producers who are trying to get into production agriculture at this time. So where is this opportunity? My encouragement to them is that in times of adversity there is also opportunity. It may not be apparent now, but you never know will an opportunity will arise. It is important to remain positive, even in a down market. Often times this is when producers can get creative to make profit and really emphasized on opportunities.
