New month, but same old grain market

corn and voter button

All eyes this Tuesday morning are on the Iowa Caucus results, but some of us have to give a glance now and then to the grain markets. Cruz may have celebrated with a speech that would not end and Huckabee may have dropped out after finding that nice guys do finish nearly last, but here in northeast Ohio, the grain markets keep the stomach churning.

Thanks, Phil

If there is good news this morning, it is that Punxsutawney Phil saw no shadow, so he predicts an early spring. Add that to the record-warm December, and we would have the shortest winter on record. I never did put out the driveway markers, although I have some tracks in the lawn to prove it. Troy Krieg has not had his plow in the drive once yet. You Buckeye Chuck fans are on the other side of the fence, since Chuck saw his shadow. Let’s be positive and go with Phil for now. An early spring and a short winter would feel good to these old bones.

Market watch

The price of grain felt good Friday. We made a new recent high in the March corn futures, at 3.72 1/2. I would have enjoyed it more if I thought there was news that justified it or there was a real bullish move coming. It comes as the specs have been lightening up on short hedges, getting ready for higher prices for whatever reason. If they come, we will look back and find a reason, but right now we don’t have much to go on.

We need demand, and the only hint of that coming is an increase in beef and dairy numbers. The beef are working on a cycle, and cow numbers have been down.

Dairy is a mystery to me. Dairymen are trying to survive on prices from the ’90s. The increase numbers have to be desperation. I grew up hearing the milk guys say they could make a living if they could just add a few cows. Now they think they can make a living if they just add a few hundred cows. I have been trying to get a handle on the milk prices, and recently ran into a Cherry Valley dairyman in a restaurant. He said one example of what is wrong with prices is that milk from Russia is coming into New York City. There is something about that that just feels wrong. We create standards here that cost a lot of production money. Then we buy our food from overseas because it is cheaper.

World supply

Next Tuesday, USDA will release the latest World Supply and Demand report. That may or may not affect the markets. In international news, we are still arguing the South American bean situation. They have spots that are too dry and spots that are too wet. The result would be a poor crop, except the Brazilians have increased acres to the point that some traders still expect record crops.

The Chinese situation is mainly a money problem. Their economy is weak, after being held up as an example of success for several years. The reality of being a managed economy is now at hand. The government does not want to import as much grain, and seems to be lowering the official domestic price. I can’t get a handle on how that helps. A lower price does not encourage domestic production.

Ethanol production

Domestically, we are focusing on the demand of the ethanol plants. In Ohio we are being told that production is being cut as much as 15 percent as the plants respond to negative margins. I remember when we heard the plants were making as much as 80 cents a gallon. This week they are said to be losing 14 cents, an improvement from the -18 cents of last week. This means the plants use less corn in the short run.

In a week when Phil and Chuck have gone back underground, our challenge is to not put our heads in the proverbial sand. We need to be up and alert, looking for opportunities. The trick will be recognizing them when they may be so doggone cheap.


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