Corn and soybean prices are currently giving back some of the recent gains on the Chicago Board of Trade.
Soybeans had rallied for two weeks, with prices mostly fueled by weather problems in South America. Prices have now gone down for three days, after four days sideways on the March contract.
Corn prices have been down over 50 cents since the first of February, with the last nail in the price coffin overnight going into Tuesday as this is written. $7 basis March futures has been the benchmark of support, but we broke that with a 6.93 3/4. Yes, we are back near 7.02, but this is a negative sign for the market.
Soybean prices are lower with a return to favorable weather in the Southern hemisphere.
Brazil has gotten drier. That is good, because rains had been holding up harvest. Argentina is getting wetter. That is good because the crops farther south are not so far along and have been too dry.
The lower prices may help domestic processors, which have been seeing negative crush margins. It is hard to support high soybean prices if the value of the products does not cover costs.
Corn prices are lower as the ethanol markets have been struggling and the dollar is getting stronger. A higher dollar makes our exports more expensive. Meanwhile, ethanol plants are closing because of local shortages of corn caused by the summer drought. Either 19 or 20 plants, depending upon the source, are closed now until the new harvest because railing corn in from better growing areas does not work financially. In addition, many plants are on slowdown because margins are poor.
When gas prices got cheaper, so did ethanol. Ethanol supplies are now at a record high level, even though some plants are closed.
Uncle Sugar came out this week with the first estimates of corn and soybean plantings. These are officially just a hint, with the real numbers being released in the traditional March 31st Planting Intentions Report. Nevertheless, the initial numbers are widely published.
USDA says we may plant 96 million acres of corn. They look for 76 million acres of soybeans, although there is some thinking that we could see as much as 79.75 million acres. Last year we planted 77.198 million.
My fear is that the ethanol markets could continue to struggle, but we plant the 96 million acres of corn and don’t really need them all. We have had high prices long enough to think they are here to stay. They are here until we have too much corn instead of too little.
On the other hand, we are still in official drought over much of the country. We cannot replace all the soil moisture in the Midwest this winter, although we sure did in my corner of the world.
We don’t generally worry out too little water in Ashtabula County, just about too few tile lines!
We will be dependent this summer on timely rains, but the odds are we get them. The chance that we don’t is the chance to sell high-priced corn again.
On a personal note, I got to see this weekend how the rest of the world lives when they get snowed in.
After living all my life in the snowfall capital of the Midwest, it was ironic that for the second time in three years I managed to get snowed in on the East Coast while visiting my daughter. Her second son was born three years ago in Newport News during the worst snowstorm there of this century. We stayed for the birth, then three extra days after a 60-car pileup five miles away.
This time, we got most of two feet of snow near Newport, R.I., where Brett is teaching at the War College. I acted like a good guest and stayed indoors while he spent five hours shoveling the drive. At home when the electricity goes out, we turn on two non-vented gas fireplaces and snuggle in. There, I was reduced to putting on four shirts and three pairs of pants to stay warm.
The nearest woodpile was at the convenience store, and you weren’t allowed to drive.