Maybe the unseasonably hot temperatures that blistered the Midwest most of September can be traced to global warming, solar flares or the high volume of hot air blowing westward from Washington.
If you farm anything anywhere in the U.S., however, you know the origin: scorchingly hot grain futures markets in Chicago, Kansas City and Minneapolis.
The corn, soybean and wheat markets were on fire throughout the summer-to-fall month and, according to many market watchers, most will likely simmer well into winter.
Wheat wave. Leading the heat wave was the wheat wave. December Chicago Board of Trade wheat futures exploded from $6.15 per bushel Aug. 20 to near $9.50 by the end of September, up a smoking 37 percent in just over a month.
Heat, indeed, was – is – the driver. Australia’s 2008 crop continues to shrivel under a classic Down Under drought. American wheat growers, approaching the planting season for next year’s hard and soft winter crops, face dry to very dry seeding conditions.
Canada, Argentina and the Ukraine, the only other big growers around, face their own weather woes.
So how high will wheat fly? Few market analysts can say because few – as in none – foresaw September’s moon shot. More important, the aforementioned market drivers are still firmly gripping the wheel.
Persisting issues. If growing conditions in Australia persist and the 2008 crop here gets dusted in – and it will because record wheat prices and a panicking export market make it a lovely gamble – the uncertainties pushing this market will keep it glowing into New Year’s and beyond.
The light generated by wheat will reflect brightly on corn and soybean prices, adding to solid gains both achieved during the early, hot harvest.
In fact, had the proverbial cab driver – you know the one; the guy who buys all the soybean futures on the board – bought November bean futures the last day of August, the $8.82 per bushel purchase would have been worth $10 a month later. (Had he bought ’em Aug. 12 at $8.14, his 45-day return would have been 30 percent.)
Corn, by comparison, was the toy poodle in September, up only 10.5 percent. Yet December futures putting on a 36-cents, counter-seasonal climb into the teeth of harvest pressure is a clear signal this poodle can hunt.
Not crazy. All this crazy bullishness isn’t crazy. Global wheat stocks are estimated at a 30-year low and the crashing value of the dollar – it’s now par with the Canadian dollar for the first time in 30 years – has global buyers paying any piper with wheat any price.
That means dormant soft winter wheat growers mostly east of the Mississippi will bring the staff of life back into their lives.
Press reports note wheat seed is virtually unavailable in Indiana and harder to find than palm trees in Illinois. If wheat acres climb this winter, it is an absolute certainty that corn acres will drop next spring.
The size of that drop depends on who wins the acre battle being fought on the futures exchange this fall.
So far, soy and wheat – which both lost acres to corn in 2007 – have a leg up for next season. And it will likely be needed.
Soybeans. Current U.S. Department of Agriculture estimates peg soybean carry-in next fall at a 215 million bushels. That means the few beans left in the bin next Aug. 31 will meet our needs for slightly less than four weeks.
But September’s hot markets should not lull farmers into believing all’s well until winter. Some of the fat carried in today’s post-New Year’s cash bids should remind all that no one’s ever lost money taking a profit.
(Alan Guebert’s Farm and Food File is published weekly in more than 75 newspapers in North America. He can be contacted at email@example.com.)
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