Soybean planting has already started in 10 states, and farmers in 13 states across the U.S. have started planting corn. It’s been a slow start in the East, but considering it’s so early in the year, that hasn’t brought dramatic delays. The fact the East is seeing moisture is also fueling talk of a big crop in 2024.
As the market starts to look at the planting pace across the U.S., Brian Splitt of AgMarket.Net says it’s too early in the planting cycle to worry about potential planting delays in the eastern Corn Belt.
“Personally, I try not to overanalyze the planting progress this early in the cycle. I think back to a year like 2019, for example, when we had flooding through a large portion of the Midwest growing region. The market was extremely complacent about that for weeks until they decided all of a sudden that it mattered. We did have a sharp rally at that point,” says Splitt.
Rains and cooler temperatures blanketed much of the Midwest this week, and some of those rains fell in areas facing drought. The most recent U.S. Drought Monitor shows 38% of the U.S. is experiencing some level of dryness, which is huge improvement from the 54% that covered the U.S. at the start of the year. This week’s rains brought some relief to areas still experiencing drought and dryness, including parts of Kansas, Missouri and Iowa.
“That little chunk of eastern Iowa seeing drought, still has red in the latest Drought Monitor, but they also had beneficial rains. So, give the Drought Monitor a little time to catch up,” says Tommy Grisafi of Advance Trading.
Grisafi says historically, when the drought picture has been this low, it’s been all systems go for a big crop.
“I believe this crop is one-third of the way made already, and it’s not even planted. I’m just talking by the moisture profile,” says Grisafi. “Now, a lot of things can change. In the great drought of 2012, the market made a low at the very end of May, and it started rallying then and it didn’t stop. So be prepared for the market to have some volatility, but right now it looks like sideways to lower.”
Similarities Between 2024 and 2014?
If rains continue to soak the Corn Belt, the reality is corn prices could drift lower. Splitt says he’s comparing the current market environment to a decade ago.
“And just to lay that footprint, in 2010, we had a major low. In 2020, another major low, and then we went and screamed higher into the 2011 highs, 2021 highs. Ultimately culminating in 2012 with the drought, and in 2022 with the invasion of Ukraine. Then, 2013 and 2023 were both transition years from bull markets and a bear market. In 2014, we made a new set of lows all the way down to $3.18 and a quarter after trading above $5 in May of that spring,” says Splitt.
“So when you take a look at our stocks to use potential estimates of a good crop, with the amount of acres that we’re looking at planting, even that being a reduced amount, the stocks to use of 17% or higher does suggest that we should see low to mid $3s,” says Splitt.
“Without a weather problem this year, I do think it’s entirely reasonable that December corn, come October, may be down into the $3.20 to $3.50 range,” he adds.
Corn Below the Cost of Production
Grisafi points out that when you think about what that means for the cash market, producers could see prices below $3.
“I traded a lot of $2 corn in my career. I hope it’s not going to that level, but we could easily see $2.99 cash corn across many parts of America that have a poor basis,” Grisafi says.
For the past few years, strong commodity prices have been the storyline. But with corn prices down 30%, if good weather continues to pressure commodity prices in 2024, the reality is farmers may sell this upcoming crop at a loss.
“So, that very bushel may be the most expensive corn bushel you ever planted in your life. You may sell multiple dollars below your cost of production,” says Grisafi. “And although farmers always talk about their cost of production in that cycle, there’s a beginning, a middle and an end, and we are way past that cycle being that the crop insurance period for the 2023 bushels has ended. Many explorations of futures and options have happened. Many farmers are going to turn ‘23 bushels into ‘24 bushels, if they don’t have a plan here in the next six weeks.”
What About La Niña?
The wild card for 2024 is La Niña. USDA meteorologist Brad Rippey says just like the impacts of El Niño are still being felt four months after its peak, the claws of La Niña may not come until fall.
“Even if we make that transition into La Niña by, say, summertime, we’re likely not going to feel the impacts of La Niña until we get into the autumn of 2024,” Rippey says. “So that’s good news for the growing season.”
According to the National Oceanic Atmospheric Association (NOAA), there’s now a 60% chance that La Niña will develop between June and August. NOAA still thinks by November 2024 to January 2025, there’s an 85% chance a La Niña will be in effect. The tropical Pacific Ocean continues to trend toward a La Niña phase, coming out of one of the strongest El Niño events on record since 1950.
Related Story: Goodbye, El Niño. Hello, La Niña? The Big Transition to La Niña is Already Underway
Summer Moisture Difficult to Predict
What could the transition mean for growing conditions in the U.S.? Eric Snodgrass, science fellow and principal atmospheric scientist for Nutrien Ag Solutions, says the transition to La Niña is so hard to predict because of something atmospheric scientists call the spring forecast barrier.
“What we found is that our ability to predict well how El Niño is going to transition before you get through the month of May is pretty bad,” Snodgrass says. “Once we get into May and start to pay attention to those ocean temperature changes, we’ll be much better at predicting it, and a lot rides on it.”
Snodgrass looked back at history, and he says every time El Niño peaked at Christmas then faded until it was eventually replaced by La Niña in summer, it created a drought scenario in the Cotton Belt.
“Some of those years it was over Texas, some of those years it was in the Delta and some of those years it was in the Southeast,” Snodgrass says. “But if you keep drought down South, we tend to get ridge-riding storms over the top of it in the Corn Belt, so the Cotton Belt gets the stress and the Corn Belt tends to do better.”
While it’s hard for Snodgrass to know what the summer will bring, he says there is one thing he’s confident in. That’s the temperature outlook.
“I do think one thing about this summer, and that is I’m expecting warmer than average temperatures,” Snodgrass says. “Most of that will be coming in warmer overnight lows, though, based on what I know now. And a lot of that is predicated on the collapse of El Niño to neutral conditions and eventually into La Niña.”
Whether it turns into a hot and dry summer or a much wetter forecast than some are anticipating, Snodgrass says he was burned by weather prediction models last growing season, so he’s skeptical to rely on those again. However, he does think La Niña could open the door for a very active hurricane season this year.
