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Analyst is bullish soybeans, bearish corn
Steve Johnson is bearish corn, due mainly to burdensome stocks and lack of any widespread weather disaster. And he’s more bullish on soybeans, thanks to tighter stocks and a long list of potential boosts to bean prices beyond this summer.
That’s the main takeaway from a marketing webinar by the Iowa State University farm management specialist Thursday evening. You can see that webinar replay here.
Johnson, who drew a virtual audience of nearly 200, always adds a caveat. He’s not a commodity market analyst or trading adviser. But he follows the same weather outlooks they do, scrutinizes USDA reports, and has been out in Iowa cornfields lately, counting ears and kernels.
“This is the healthiest corn crop I’ve ever seen,” Johnson said – of corn in Iowa, at least. He’s been rating the corn crops for 17 years as a volunteer reporter for USDA.
Technical analysis of charts suggest December corn futures will have support at the life-of-contract low of $3.22 for now, but resistance at the June high of $3.48½, he says.
He doesn’t expect December futures to hit the recent July 6 high of $3.63. That price was a perfect 50% Fibonacci retracement of the difference between the contract high in January and low in June.
USDA’s planted acres report showed a shortfall of 5 million corn acres, which contributed to an increase in the department’s projected cash corn average from $3.20/bu. in June to $3.35/bu. this month.
Johnson is skeptical that the average cash price will stay that high. The ongoing worldwide COVID-19 pandemic is one factor that may reduce demand for corn, he believes.
Yet, corn is likely to be more profitable than soybeans this year, due in large part to USDA payments that could approach $100 per acre for some farms, Johnson says.
Johnson advises selling into any rallies with enough corn to cover needed expenses and loan payments this fall. Try to avoid storing bushels long-term commercially and look at other market tools such as a minimum price or basis contract.
Soybeans are a different story.
“I believe beans are likely the crop that could go up in price, because ending stocks are relatively tight,” he said. USDA’s projected stocks-to-use ratio for soybeans at the end of the 2020-21 marketing year is only 9.8%. For corn, it’s 18.1%, which is the largest ratio in recent history.
Another bullish factor for soybeans is that models show a continuation of hot, humid, and stormy weather through August for much of the Corn Belt. It’s what one weather analyst calls a forecast of “warm: wash, rinse, and repeat,” Johnson says.
That’s a favorable environment for soybean diseases and Johnson says some Iowa farmers are already applying fungicides.
Other bullish factors for soybeans include weather challenges in China and the likelihood of more Chinese purchases of U.S. soybeans. In South America, there is concern about a potential 2021 weather transition to La Niña that could limit its crop size.