Farmers ended 2023 “fighting” the corn market, stubbornly unwilling to sell as prices relentlessly softened early this year. Then came a capitulation as the John Deere low formed in late February. That is when farmer cash flow needs trumped farmers obstinance to sell and many became caught with expiring basis contracts. During this time, the trade touted the bearishness of the deteriorating balance sheet looking for enough acres to get planted with a trendline yield to protract the bearish market trend into 2025 or longer.

Low prices are the cure for low prices, and the market began the process of healing itself. Low prices discourage acres and encourage demand interests.

The March planting intentions report set expectations for corn acres at 90 million, which along with a trendline yield, 181 bushels per acre (bpa), would be neutral, neither adding nor subtracting much from the projected carryover when unadjusted for demand.

That appeared to be enough to sustain the current negative trade sentiment that has pervaded the market so far this year. The trade has now been trained to think that $5 bushel is a great price for corn by showing them it could go to $4 bushel or lower. Farmers have thus opened bin doors moving physical corn on the spring market recovery.

After adding 10 million bushels to the February WASDE corn carryover, then projected at 2.172 billion, USDA has since reduced the current year projected corn carryover by 50 million and then another 100 million bushels in subsequent reports to 2.022 billion bushels.

While the U.S. balance sheet improved, South American corn production has been rolled back to where fewer bushels will be available for them to export. Brazil’s safrinha corn crop will finish with a premature end to the wet season in all but southern Brazil where they are experiencing epic flooding. The U.S. corn export outlook has potential for further improvement of 200-plus million bushels. Domestic Brazilian corn demand is also on the rise due to their expansion of corn ethanol production. Ukraine corn production is what it is, unlikely to be able to respond to market fundamentals, which are overruled by war conditions there. The bearish demand outlook that had dominated, appears to be easing or having potential to do so. By reducing the 2023 corn carryover, the corn carry-in to next year shrinks.

By using 90 million planted corn acres and a 181 bpa trendline yield, USDA projected a 2.102 billion bushel 2024-25 corn balance sheet. That is still a 100 million-bushel year-to-year increase in carryover, but the projection is precarious at best. A 200-million bushel increase in exports would reduce it to 1.902 billion bushels. The biggest variable is of course actual planted acres and the yield –181 bpa would be a record yield.

The first half of May is the ideal agronomic planting window to produce highest yields. Very little U.S. corn and soybeans were planted during the first half of May due to waterlogged corn-belt soil conditions missing this year’s opportunity for best yields. Historically, we have lost more yield on our farms here in northwest Iowa to too wet conditions rather than being too dry. Our farms produced a record corn yield in what was considered to be a drought year in 2023.

Half of our family corn was planted in April but we have made zero additional planting progress in May. The heartland is waterlogged from flooding in Texas northward, where the air flow from the gulf picks this moisture up before reaching us. This has kept temps generally cool as well. It would not appear to be the kind of start to the growing season that would result in a record yield. A more likely corn yield would appear to fall into the more recent 173-177 bushels per acre range. That is 4 to 8 bpa below what USDA now has plugged into its balance sheet as a placeholder. That is a potential 700k-1.4 billion bushels less production due to missing the mark for a record yield.

At the time it was provided in the planting intentions report, 90 million acres of corn was close to neutral for the balance sheet. If planting progress had occurred uneventfully, 90 million acres was likely to be planted or more. Conditions, however, as they have evolved, make planting 90 million acres of corn less likely.

With a 177 bpa yield, every million acres of intended corn lost is a 177 million bushel deduction from supply. Nutrien Ag, which provides a lot of fertilizer to 600,000 farm customers, so has a handle on acreage, said in its earnings call that they expected U.S. farmers will grow just 87 million acres, harming their nitrogen sales. Three million fewer acres times 177 bpa is 531 million bushels less production. Four bpa less yield from trendline, 177 bpa from 3 million less acres would reduce the 2024 carryover by 879 million bushels from 2.102 billion to 1.223 billion bushels prior to adjustment for demand.

As to soybeans. USDA has been dialing back export demand and boosting production. 86.5 million planted acres forecast in March intentions is likely, supported by planting delays and some shift from intended corn. The 52 bpa yield peg is less likely. The USDA soybean carryover projection often peaks early and then shrinks during the season. The USDA carryover projection began at 264 million bushel in 2023 and was forecast to grow to 445 million bushels in their May WASDE.

I think that a yield equal to last year of 50.6 bpa is more likely, which shrinks production by 125 million bushel. China’s soybean imports are likely understated and CONAB’s Brazilian production estimates are likely more accurate than the USDA’s, creating potential for U.S. export growth. It would not take that much to shrink back to near a 264 million bushel carryover again. USDA has been touting an optimistic boost in crush demand, but the Administration has yet to match that with supporting biofuel regulatory policy. They need workable 45Z (clean fuel production credit) regulations put out now instead of too late as usual.