Bullish Fundamental – US Cost of Production

Look, it’s hard to be a bull in today’s ag market.  I’m with you.  That said, here’s a little food for thought….

Check out these screenshots of 2024 crop budgets from the Mississippi State University and University of Illinois Urbana-Champaign. Generally speaking, it takes $5 corn to cover production costs. And it takes $11-$12 beans.

Now look at the attached futures curves….its below cost of production across the curve into 2026.

If you are a corn consumer or a soybean meal/oil consumer….ask yourself, “What has to happen for prices to be materially lower than today in 6-9 months?”  Said another way, “What exactly am I waiting for?”

US farmers are smart, and so are their bankers.  Don’t expect this year’s big crop to repeat without a market incentive.  The crop won’t be there.  Fertilizer will be reduced.  Marginal land will not get planted.  Fungicide applications won’t happen.  The high cost, high performing seed varieties will be subbed out for cheaper, but still reliable genetics.

This looks like a great pricing opportunity for consumers at the long end of the curve.

What do you think?