Key points:

  • Futures for December 2024 are now being compared to 2014, which had one of the sharpest declines in history.
  • The average price of December corn futures in Chicago for the first 4 months of 2024 is $4.73 per bushel.
  • By the end of April 2024, the net long position had decreased to 218,000 contracts.

For much of 2023, industry analysts have been trying to determine which year in the past – 2012 or 2013 – the performance of new-crop corn futures on the Chicago Board of Trade would be more similar to. As a result, 2013 became a more accurate analogue.

Now, futures for December 2024 inevitably draw comparisons to 2014, which saw one of its sharpest midyear declines on record.

Corn prices are growing in April

In the first four months of 2024, the average December corn futures price on the Chicago Board of Trade was $4.73 per bushel. This value practically coincides with the average new harvest for January-April 2014 ($4.76) without taking into account inflation. Moreover, both average values are 15-18% lower than in similar periods of previous years.

However, price dynamics in 2024 and 2014 are significantly different. Since the beginning of January 2024, December new crop corn futures have fallen 11%, reaching a low on February 26. The annual loss as of May 8, 2024 was 4%.

In 2014, the price dynamics for new crop corn were different. In January, prices did not change, but in February there was an increase of almost 5%. December 2014 futures hit a yearly high in early April, posting their biggest year-to-date gain of 15%. The annual increase as of May 8, 2014 was 14%.

At the same time, December corn futures for the new 2024 crop have not yet returned to their annual high of $5.02-1/4 per bushel, set on January 2. However, on Tuesday, May 7, 2024, prices approached this level, reaching $4.91-1/4.

Supply growth

On Friday, the US Department of Agriculture (USDA) will release its first official corn stock forecast for 2024-2025. A preliminary forecast released in February predicted US corn ending stocks would rise 17% from 2023-24, reaching a 37-year high. This value reflects a 60% increase in reserves in 2023-24 and a 1% decrease in 2022-23.

In February 2014, the USDA projected a larger increase in corn inventories in 2014-2015, up 43% compared to 2013-2014. These figures contrast with an 80% increase in 2013-14 and a 17% decline in 2012-13, when there was a catastrophic drought. It is worth noting that the first USDA forecast for 2014-2015, published in May 2014, showed a 51% increase in inventories compared to 2013-2014, which coincided with trade estimates.

By the end of February 2024, funds had accumulated a record net long position in corn futures of 341,000 contracts, reaching this level after eight weeks of active buying.

It is worth noting that since 2014, the funds have continuously increased their net long position in corn over 13 weeks, going from a moderate net short position of 95,000 contracts to a net long position of 276,000 contracts over this period. By the end of April 2024, traders had reduced their net long position to 218,000 contracts.

South American influence factor

At the beginning of 2014, the United States Department of Agriculture (USDA) twice lowered its forecast for Argentina’s corn harvest for 2013-2014, by a combined 8%. The reason for the decline was unfavorable weather conditions, resulting in warm weather. Combined corn production in Argentina and Brazil was expected to fall by more than 10% compared to the previous season. At the same time, the USDA estimate for Brazil’s 2013-2014 corn crop underwent four consecutive increases between April and July, increasing by a total of 11% (8 million metric tons).

Over the past decade, Brazil’s corn harvest has grown by more than 50%, and Argentina’s potential has nearly doubled. However, in 2023-2024, dry weather in Brazil has led to lower crop forecasts, and pest damage could significantly reduce the harvest in Argentina, which is more likely to lead to higher corn prices than vice versa.