MT. JULIET, Tenn. (DTN) -- Farmers have nearly 37% more corn in on-farm storage as of June 1 than the year before, relying on their enhanced storage capacity as profitable prices remain elusive.
On June 28, USDA said national corn stockpiles stood at 4.99 billion bushels (bb), 22% more than in June 2023. Of that, 3.03 bb are stored on farms, while 1.97 bb are in commercial storage.
"We did have an opportunity for higher prices in May, but we didn't ring the $5 bell," DTN Lead Analyst Todd Hultman said. The July corn futures contract hit a high of $4.755, while the national average cash price only got to $4.49 during May, which is historically when a seasonal peak occurs.
Weather problems this spring may also have encouraged some farmers to hold onto more corn in the hope of bullish price development. Instead, prices slid, with July futures prices trading below $4 per bushel during the day on July 1.
"A year ago, we were still in the ballpark of $6 corn. That's the other reason farmers are so stubborn right now. They feel like it's gotten beat down too hard," Hultman said, adding that many farmers' breakeven levels are around $5 per bushel. "When you factor in inflation into the production cost mix, this is a very cheap price. Spot corn equates to like $3.10 in pre-COVID terms."
While it's still early in the growing season and there have been issues with flooding and wet planting, USDA expects farmers to plant 91.5 million acres of corn and harvest 83.4 million of it for grain. The agency will incorporate its updated estimate in the July World Agricultural Supply and Demand report. The last report, from early June, used a smaller harvested acreage estimate and still forecast a 14.86-bb crop. (Read details on the June Acreage and Grain Stocks reports here: https://www.dtnpf.com/…)
Another indication that farmers aren't selling: The national average basis, which measures the difference between cash prices paid to farmers and future prices, firmed between March and June, from 42 cents below the July contract to 20 cents below.
Hultman said he sees trucks moving grain where he lives in South Dakota. Ethanol plants have been bidding up to attract supplies, and some farmers may be taking advantage of free storage offers from local elevators to empty their bins before the new crop comes in.
"It goes along with the notion that they're having a hard time getting the corn out of the farmers' hands," he said.
Hultman said noncommercial, or speculative traders, hold a heavy, net-short position. There are two likely scenarios.
"Either the specs just drive this thing into the ground, and people finally cough up in a real ugly way," he said. "Or, the farmers hold out long enough, and the specs have to give up. Maybe some surprise happens in the market, and we get a short covering rally that farmers take advantage of."
Hultman said farmers would rather not be in a market scenario where the position of speculative traders influences their profitability. "But I think farmers might be stubborn enough to pull it off," he said. "It seems to be a faceoff between stubborn farmers saying their corn is worth more than this, and managed futures funds trying to drive the market down."
Katie Dehlinger can be reached at katie.dehlinger@dtn.com
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