Critical times for cash grain markets

Prices have slowly worked higher on the Chicago Board of Trade. Since today is Tuesday, and that is our traditional “Turnaround,” it remains to be seen if we can continue to firm up prices.

Corn futures have led the market higher, making new recent highs after a horrible low three weeks ago. On the 10th, we touched 4.06 1/4 on the March futures, but closed at 4.32 3/4 the same day. The reason was the USDA reports released that day, especially the news that the final estimate for the corn crop was lower than expected.

Since the 10th, we have traded back as low as 4.21 on the 21st, but Monday (Feb. 3) we hit 4.38 3/4 and we are currently (early Tuesday) trading one tick under 4.38, up two cents for the day so far. If we can stay up here today, we may have an actual uptrend starting.

Lot of corn out there

The trade is talking about the 8 billion or so bushels of corn that are believed to be still owned by the producers. This is a result of prices dramatically lower than we had last year, combined with the cash-strong position of those producers who sold at record prices last year.

Normally, there are heavy sales just after the first of the year. This time, the farmers don’t have to get the money, and they are very unhappy with the prices they see.

Down side

One big problem comes with big farmer ownership of the crop: The market knows where the corn is, and they know it has to move sometime. This tends to limit price movement, although basis can be bumpy as spot shortages emerge through the year.

The producer needs to fear waiting too long to sell, as this could shape up to be a cheap price and basis summer.

Last week we had the largest exports of corn since March of 2011. This week we were on the low end of expectations, although general bad weather contributed to lower loadings.

On the soybean side

Soybean futures have gone through a couple of large price swings. The first trading day of the year we had a low of 12.66 1/2 March futures, and a low there again on Jan. 13.

We rallied to a high of 13.30 1/2 on the 16th, but dropped back to 12.60 on the 30th. By this Monday, however, we were back to just a tick under 13, and we are currently (again, Tuesday morning) trading 13.02 1/4, up two for the day.

Watching South America

Focus now is heavily on the South American crop. The Brazilian harvest is well underway, with vessels outside the ports waiting to be loaded. Record yields are reported in the best areas of Brazil.

This has contributed to lower export bids on beans coming off the Mississippi River, as we now have competition for the export market.

Interior processor markets will be more competitive now than they have been.

The drop in exports will affect basis more than price in the short term, but this is the time period that has had me worried. We will be flooded with Brazilian beans, with some even coming to the East Coast of our country, then we run the risk of an increase in planned planting as we anticipate the March 31st Planting Intentions Report from USDA.

The increase will come if farmers who are able to switch look at soybeans as being more favorable, given the prevailing new crop prices and the relative costs of planting.

Wheat slide

The wheat prices continue to slide, although some see hints of an upturn. Our low was 5.60 1/2 March futures on Jan. 10. By the 30th, we were just above 5.50. This morning we are back to 5.63 1/2.