October WASDE: Storage Decisions Loom Large

The 2024 corn and soybean harvest are progressing ahead of schedule across a dry Midwest. Corn harvest was 30% ahead of its five-year average for the week ending October 6 and soybeans 47%.  

U.S. corn and soybean futures rallied during the past month amid concerns of drought in South America and optimism about U.S. demand. December corn futures rose from an August bottom of $3.91 per bushel to $4.32 per bushel during the first part of October, while November soybean futures bottomed in mid-August at $9.51 per bushel and increased to $10.66 per bushel in late-September.

Producers are making important storage decisions. Now is the time to take stock of storage costs. The report below includes the current outlook for corn, soybeans and wheat, as well as cost considerations for storing crop.

Corn Outlook: Bearish Domestic, Bullish Global Markets

The markets’ attention now centers on the size of the U.S. corn and soybean crops for marketing year 2024/25, as well as condition and performance of South American crops. Ahead of USDA’s October World Agricultural Supply and Demand Estimate (WASDE), markets anticipated lower yields and production levels.

However, USDA raised the average corn yield to 183.8 bushels per acre, a record if realized. Overall production, projected at more than 15.2 billion bushels, would be the second largest on record.

Even so, USDA’s 2024/25 corn outlook forecasted smaller supplies, larger exports and reduced ending stocks. Total corn use for 2024/25 is expected to increase 25 million bushels due to higher exports, which are projected at 2.325 billion bushels, about 8% above the 10-year average if realized. Meanwhile, total supply fell 33 million bushels, beginning stocks were reduced by 52 million bushels and ending stocks dropped 58 million bushels for a total of about 2 billion.

The 2024/25 stocks-to-use ratio fell to 13.3%, but this remains above the 5-year and 10-year averages of 10.7% and 12.4%, respectively. The average corn price held steady at $4.10 per bushel.

Foreign corn production for 2024/25 declined 1.83 million metric tons due to lower expected production in Ukraine, Egypt and Russia. Meanwhile, USDA’s projected world ending stocks came in 0.4 million metric tons lower than market expectations. USDA reduced world ending stocks to 306.5 million metric tons. The world stocks-to-use ratio fell to 25.1 percent, the lowest since marketing year 2013/14, signaling a tight corn global market.

USDA’s domestic balance sheet revisions to corn were slightly bearish, while global revisions were slightly bullish. December 2024 corn futures finished the day roughly unchanged at $4.16 per bushel.

Soybean Outlook: Neutral to Bearish Domestic, Bearish Global Markets

Markets expected the September soybean yield projection to drop from 53.2 bushels per acre to 53, but USDA’s reduction fell short for an average of 53.1 bushels per acre. If realized, the U.S. soybean crop would come in at 4.58 billion bushels, or 2.6% higher than the previous record.

USDA made no changes on the demand side, leaving ending stocks at 550 million bushels, the highest since 2018/19 and 49% above the 10-year average. The stocks-to-use ratio remained at 12.5% -- 3.5 percentage points above the 10-year average -- and the U.S. season-average soybean price was unchanged at $10.80 per bushel. The result: Changes to the domestic soybean balance sheet were neutral to slightly bearish.

Meanwhile, global ending stocks for 2024/25 increased slightly to 134.7 million metric tons, a record if realized and reflective of USDA’s expectation that Argentina’s and Brazil’s year-over-year production will rise 6% and 10%, respectively. Markets had expected a slight decrease from the September WASDE; ending stocks remain bearish to the market. November 2024 soybean futures finished the day at $10.05 per bushel after a trading high of $10.24 per bushel.

Wheat Outlook: A Contrarian Ending Stocks Estimate

USDA’s all-wheat outlook called for reduced supplies, larger domestic use, unchanged exports and lower ending stocks for 2024/25. In line with its NASS Small Grains Annual Summary, USDA trimmed all-wheat production by 11 million bushels to 1.971 billion. This still is 9.3% above production for the last marketing year.

Higher feed and residual use increased domestic use by 10 million bushels to 1.146 billion, while exports remained unchanged at 825 million bushels, or 16.7 above last marketing year. The U.S. all-wheat stocks-to-use ratio is 41.2%, the highest since 2019/20. USDA left the season-average farm price at $5.70 per bushel.

Markets anticipated revisions to global wheat supply, with particular attention to production estimates in major exporting countries. In fact, Russia’s weather challenges led USDA to trim the country’s 2024/25 wheat crop to 82 million metric tons from 83 million metric tons. Russia would see its wheat production fall 10% from the last marketing year if realized.

This wasn’t enough, however, to reduce projections for world ending stocks. Markets expected a decline in what already is the lowest level since 2015/16, but USDA increased world ending stocks by 0.5 million metric tons to 257.7 million metric tons. The world stocks-to-use ratio also increased slightly to 32.1% -- 3.8 percentage points below the 10-year average.

The Economics of Grain Storage

Farmers had a lot of grain in bins heading into harvest. Old crop corn and soybean stocks in all positions on September 1, 2024, were up 29% from a year ago for a total of 1.76 billion bushels and 342 million bushels, respectively, according to USDA’s September 30th grain stocks report.

Many producers will consider putting new crop into storage, hoping for an increase in price that outweighs storage costs. As a result, it is reasonable to expect commercial storage to come with a premium price.

While storage rates for corn and soybeans vary by location and elevator, I have built an example that highlights the need to consider how storage costs impact profitability.

The below example starts with December corn futures at $4.18 per bushel with a basis level of $0.31 under. Basis was taken from DTN’s National Corn Basis Index. This gives a cash price of $3.87 per bushel. The “storage cost” includes a hypothetical cost of $0.05 per bushel to store while also considering 8% interest. This number will need to be multiplied depending on how long the grain is held in storage (e.g., months, etc.).

Typical costs for commercial storage may include a one-time drop fee of $0.15 per bushel. Drying and shrinking charges also are important to monitor; the example excludes these charges.

If I held my grain in storage for one-month (from October to November), the cash price I need to cover my storage cost is $4.10 per bushel, as shown in Table 2. If December futures are $4.18 per bushel, basis needs to be $0.08 under for me to breakeven with this position.

If the grain is held for six months (out to April), I need a cash price of $4.34 per bushel to cover my storage costs. Hypothetically, if the May 2025 corn futures contract traded at today’s price of $4.42 per bushel, basis would need to be $0.08 under for me to breakeven with this position.

Storage allows you to take advantage of any improvement in basis. However, you run the risk of losing if the corn market drops.