Grain markets are moving higher on the Chicago Board of Trade this Tuesday morning, April 19, and analysts are struggling to explain why this recent rally continues, even as we make new highs on corn and beans, and have moved Chicago wheat futures back near the recent high.
Look south
The biggest reason given for better prices is the weather in South America. Wet weather there is cutting both the soy crop, which is finishing harvest, and the corn crop, which is being cut in Argentina. In addition, political news in South America is adding to the move, and perhaps the political news is dominating: Brazil voted to impeach its president.
Brazil is also considering importing corn from the U.S. if the current plan to eliminate the 10 percent import duty goes through.
The impeachment is strengthening the real, the Brazilian currency. Its current weakness has made the Brazilian soybeans more competitive in world markets, and this would now change.
In Argentina, the emphasis is on the wet weather that is hurting the corn crop, although some estimates have not been changed. The harvest is now delayed enough to be 5 percent behind.
One estimate has cut the Brazilian crop by one MMT due to dry conditions, not the wet from farther south.
Market reactions
So, a mix of weather, but the result of smaller crops is helping our prices. Soybean prices have made new recent highs, regardless of the fact that the soybean exports are currently the lowest of the year. The best I can say is that this is the time of the Brazilian harvest, so the low exports are expected.
Corn exports, meanwhile, were the third best of any week this year so far.
So, look at prices. The old crop May futures have now rallied over a dollar from the 8.56 of March 3 to the 9.64 1/4 of Monday. We are currently 9.61 1/4. The new crop November futures are up seven and a half cents this morning, at 9.74 3/4. At the 9.75 we had a new high.
July wheat has turned around a skid to return near the highs. We made the recent high at 4.86 1/4 on the 4th. By the 11th we were down to 4.53, but this morning we are back at 4.82 3/4, near the recent high.
The recent run-up in prices may be playing with the crop planting acres USDA put out three weeks ago. The gains in beans, particularly, may be inspiring a switch to beans. The problem for the farmers is that they are tempted by the run-up to raise target levels, once again hoping there is a chance for $4 corn and $9 soybeans. The beans got that high and higher, but the corn is still a long way away.
Typical of this time of year
It is not unusual for markets to move this time of year. Analysts always talk about “buying acres,” a concept I find humorous. It makes the market sound like a living, breathing thing.
It is actually an amalgam of the mood of the traders. They may be more spooked by the technical aspects of trading right now. The beans have broken into new highs, and they have to respect it. The corn is trading at heights near the December highs, and speculators are afraid to be on the wrong side.
That leaves the biggest specs of all — the American farmers. They have a greater percentage than normal of the old crop still in the bin. In my view, they should be out of beans and have much of the corn sold.
This is all a selling opportunity. Significantly higher prices come only at the cost of crop problems, and none of us wants that.
