2 Years After All-Time High, Corn Prices Have Cratered, Leaving US Farmers Holding The Bag

Corn is the most actively traded commodity crop in the world and the economic backbone of the rural US. It also influences the movements of other crops, especially soybeans, another staple of US farming.

After peaking in the spring of 2022, the price of a bushel of corn has been cut in half, leaving many US farmers out to dry.

Unexpected Harvest

This time last year corn futures were trading well above $6.50. Supply was low as weather patterns wreaked havoc on global crops and geopolitics - namely the invasion of Ukraine - kept production limited. 

Many US farmers adopted a “store and ignore” approach, believing these trends to only continue and that their crops would appreciate. 

Then the US saw a record year in production; so did Brazil, a major corn exporter. Prices plummeted as the market was hit with a glut of supply. This led many farmers to continue to store their corn, hoping for a reversal in price. This December saw the most amount of corn stored in the US ever at 7.83 billion bushels.

Farmers Hit Hard

These farmers are now in a bind, some paying a few cents a bushel per month to store their corn, hoping the market will turn around.  But any rally in the near term is likely to be small as that stored corn gets unloaded on the market by eager farmers.

As the price of corn sits just above $4 a bushel, most farmers will take a significant hit if they sell anytime soon. The University of Illinois estimates the break-even point for farmers in the state to be $5.27.

Opportunities For Investors

The US agriculture system can present a big opportunity and can be a critical component to a well-diversified portfolio. For those who believe we’ve reached the bottom for corn prices, now may be the right time. Individual investors can get involved by trading futures, but this can be a complicated practice out of reach of many. Even for seasoned traders, pitfalls abound.

Another alternative is investing in a commodity ETF, like those offered by Teucrium Investment Advisors, LLC. The firm offers a host of agricultural funds carefully curated to give investors simple, liquid access to commodities, funds like Teucrium Corn ETF CORN.

Photo by Wouter Supardi Salari on Unsplash.