A European production and supply crisis may open a price door for American corn growers. A dramatic collapse in French crop conditions combined with restricted Ukrainian exports could increase U.S. export demand, thus increasing futures prices.
France's good-or-excellent crop ratings plummeted from above 80% in late June to just 29% in recent weeks due to drought, according to Jeremy Strubhar from Advanced Trading. Speaking on this week’s episode of Ag Marketing IQ In Depth, Strubhar says this shortfall positions France to import three to five million metric tons of corn, potentially including 200 million bushels from U.S. suppliers.
“France may need to import some corn from the world market,” Strubhar explains. “Traditionally, that corn would have come from the Ukraine region, but the Russians have closed on the Strait of Kerch, which has limited the ability of Ukraine to export their corn.”
The potential boost to U.S. exports doesn’t sound significant, but could have substantial impact on domestic carryout, which is now estimated around 1.7 billion bushels. “You drop it by two hundred. And that is significant,” he notes.
The wild card is whether a change in geopolitics will reopen shipping and restructure the availability of supply, Strubhar says.
Major variable: Geopolitics
To capture potential upside while protecting against downside risk, Strubhar recommends farmers use options strategies. "I want to set a floor but keep our upside open," he said, suggesting producers buy puts to protect stored grain or sell corn and buy call options to maintain market participation.
For soybeans trading above $12, Strubhar encourages farmers to act. “Without a doubt, since we have a profit in beans and we're significantly above the crop insurance levels, we need to be setting floors,” he says.
For more tips on how to manage risk and secure higher price opportunities, watch Ag Marketing IQ in Depth.