Futures markets strong on COVID news, exports

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Corn harvest.
Corn harvest. (Farm and Dairy file photo)

Prices on the Chicago Board of Trade continue to please producers. On Nov. 23, we were seeing new highs on December corn futures, although not on March corn futures. We had a new high on January soybeans and were back over $6 on Chicago wheat futures.

This late in November, we are starting to trade corn off March futures, and cash traders will ignore the December contract by the end of the week. Still, it is significant that December futures made a new high of one tick under $4.30 Nov. 23.

Some of this comes from the pressure of traders rolling hedges to March futures. The March made the $4.353⁄4 high back Nov. 11, but was up Nov. 23 by $53⁄4 cents, at $4.333⁄4. The January soybean futures contract traded $12 Nov. 23 before a return to the current $11.95, up 14 cents.

Spurt in exports

Corn and soybeans are both beneficiaries of a huge spurt in exports. One market letter I follow closely makes the point that corn exports are now at 52% of the amount projected by U.S. Department of Agriculture for the year. Soybeans are at 85.7% of the yearly expected exports. These numbers come with nine and a half months left in the marketing year!

Both export numbers suggest that the USDA will at some point make big revisions in their balance sheets for corn and soybeans. Our carryouts will have to get much smaller if these exports continue. We much caution, however, that it was always expected that the Chinese, especially, would buy a disproportionate amount of their total imports at or near harvest. Looks like they did, and are driving the export numbers.

It must also be considered that the expected coming adjustments in carryout in the balance sheets are already “in the market.” That is, those trading futures can look at the export numbers and expect revisions in government numbers, so those revisions are already demonstrated in the current values.

Still, there is a lot of bullish enthusiasm in the grains, and there is most of the marketing year to continue. This is being seen as a selling opportunity, however. Don’t be tempted to stand aside and wait for “beans in the teens.” It could happen, but it is prudent to remember $8.30 beans, not $14 ones.

Positive news

The current COVID news is helping prices, although it is hard to track the portion of our bullishness that comes from good virus news. Vaccines are on the horizon, faster than many expected. When President Trump said we would see vaccines before the end of the year, it was considered by his critics to be election-year bluster.

Now it is reality, although it remains to be seen when the general population will be inoculated, or even if they will be. Electioneering and fear of vaccines has a third or more of the population adverse to the needle.

The good news comes even as the bad news is another spike in the disease. As the disease goes away, consumption of food and fuel increases. This helps grain prices, and maybe already part of the rally.

Wheat

Notable in the grain markets currently is the action in wheat. We trade three classes of wheat in three markets. We have Soft Red Winter in Chicago, Hard Red Winter in Kansas City, and Hard Red Spring wheat in Minneapolis. Currently, the Chicago wheat is at a large premium to the hard wheats. It is also at a high price, over $6. It has been higher, with a December futures high of $6.381⁄4 the third week of October.

On Nov. 23, we were at $5.021⁄2, up nine and a quarter cents. It must be noted that the wheat is at high prices even though the world supply is very high. We have seen problems in our wheat crop, but eventually, prices will return to lower levels in recognition of world crops and inventories.

Current prices are causing some in the Upper Midwest to turn some traditionally corn and bean acres to wheat for the first time in a very long time. The spring wheat is attractive after a year of production problems and a look at high futures prices.

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