In the grain business, we talk about “Turnaround Tuesday” as if we expect price trends to change on Tuesday. Sometimes that is true. This week, however, it is all about Monday.
Monday we had large price jumps in corn and soybeans. The bounce was more than welcome in the corn markets, where we had slipped to the lowest prices since Sept. 30. The March corn contract traded 3.62 1/2 on Nov. 28, then fell to 3.41 3/4 on Dec. 1, nearly 21 cents from the high. With the 12 cents gain for the day Monday, we were back to 3.5 1/4, and had a high a half cent higher.
The corn market was led by soybeans, which used good export news to gain over 22 cents at one point, and close up 16 cents on the January contract, to 10.43 1/2.
Follow-through this Tuesday morning has the January futures up almost a nickel. The Chinese market provided the spark, with a trade of 426,000 tons of soybeans. Our January soybean chart shows us at the highest point since July, but the Chinese chart shows us blowing off the top of their market.
The exports have been very strong, although this week was actually at 1.9 mmt, the lowest in eight weeks. This is a demonstration of how much the market is affected by Chinese news.
Expect crop to grow
The return of corn prices to the high side is exciting, but must be tempered by the realization that the huge crop will continue to moderate any price gains.
The market is looking forward to the January “inventory Reports” from USDA. The trend is for a large crop to keep getting statistically larger. That is, the government is seen as shy to report the biggest number until the end of the year, so as to not be thought to be manipulating prices if estimates go up and down in successive months.
Consequently, we are defensive about what will probably be the largest crop production number yet.
Friday the USDA Supply and Demand Report will preview some of the numbers in the January report. That is, production numbers may be changed as the supply and demand are predicted. This can make a market move if there is any surprise, but will otherwise be a non-event.
Dry weather concerns in Argentina have helped our bean prices, although the dry weather has mostly helped them plant their crop in a timely fashion. Rain from here on will be negative to prices in the absence of other news.
The Chicago wheat futures market has finally turned higher the last two days after a negative chart since harvest. Remember that here the concern to the prices has been a huge domestic crop.
In October we put in a little runup, but the trend has been negative. On the 1st we put in a new contract low at 3.93, down from the previous contract low at 4.09 the last day of August. Our recent high was back in the middle of October at 4.45 3/4.
This long run of low wheat prices has had the inevitable result of low wheat plantings locally. Farmers are struggling to justify planting expensive acres with wheat.
Down the road
The low corn prices relative to soybeans has economists talking up the corn-to-bean ratio and predicting a long-term change in acreage.
USDA recently released its 10-year projections. They predict that corn acres will drop from 94.5 currently to 90 million in 2017. Soybeans will move from the current 83.7 million acres to 85.5 in 2017. It is suggested that this return to beans could be even larger if the current price ratios continue.
I remember when we anticipated that we would grow more beans then corn. The ethanol revolution ended that trend, but the prices have us moving back in that direction.
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