The contra-seasonal grain market we have been watching since August is back with a snow flurry for Christmas. New contract highs in corn and soybeans currently have analysts looking for reasons it is happening and farmers looking for reasons to sell.
Producers who rewarded the rallies in weeks past are having seller’s remorse. Analysts who argued for sales in weeks past are now questioning whether to sell more old crop, sell new crop, or do nothing until the scope of the rally has run its course.
March corn futures on the Chicago Board hit a new life-of-contract high Dec. 20 at $4.403⁄4, just beating the old high. Again, we made a new high the morning of Dec. 21 at $4.42. We were currently trading at $4.413⁄4, near the high. We were only $4.151⁄4 once Dec. 7.
March soybeans, meanwhile, have blown through the old highs. We had been watching the January high at $12. Now the calendar is asking us to focus on the March contract. The March futures made a new high of $12.483⁄4 Dec. 20. On Dec. 21, we saw $12.561⁄4. We were most recently trading near $12.50. We were only $11.43 at the recent low Dec. 2. That means we have gained $1.13 in two weeks.
The new round of market enthusiasm may have roots in the good news about COVID-19. We have daily pictures of prominent politicians happily sitting for shots. The result of this is an attitude, in equity and commodity markets, that happy days are here again, or at least on the horizon. A return to full employment helps the economy and helps consumption.
Helping commodity prices in the short run is the assumption recently that we would get a COVID-19 relief bill. This was confirmed Dec. 20. Uncle Sugar creates relief by printing money. That increases the money supply. That also causes a drop in value against other currencies.
That makes our commodities relatively cheaper, and more desirable, for export. Our dollar index value dropped last week to $88.19. That means that it is worth a relative 88 cents now compared to the currencies it is indexed against. Back in early 2020, we were at par and above.
I am reminded of our family trip to Italy in 2018. We were getting less than 70 cents versus the Euro in exchange, the worst it had been for years. It was a great trip, but more expensive than it would have been a couple of years later. Now we are back there.
Sometimes it is not good to think of things in terms of real value. I remember still farming when I went to Florida one winter. I went to check into a nice hotel near St. Petersburg and was told the price of the room. “That’s 12 bushels of soybeans!” I exclaimed.
Four hours later, I had been all the way around the bay and had checked into a fleabag Gujarati motel that had been renting rooms by the hour before we got there. Sometimes 12 bushels of soybeans is a good trade for a good night’s sleep. The six-bushel room was not worth it.
This year, we have gut-wrenching decision of where to price grain in a rising market. It is easy to say you should sell now, but the advisors had us selling it the end of July, and the world changed in August. It is still changing.
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