Published: July 01, 2008 05:35 pm            

Grain Angles: Futures, questions increasing

Originally published in the June 27, 2008, print edition.

Over the past two weeks corn and soybean futures have continued to climb. Market volatility is not less and the wide range of opinions is no fewer today.

The questions that producers have are increasing as the market moves higher and decisions need to be made about 2009 inputs with no good way to price next year’s production. We continue to be at that crossroads with extremely high commodity prices and no certainty of higher profitability.

Corn futures have moved up 71 to 78 cents in the last two weeks. It appears that $7.60 for July and September corn is the stopping point for now. July and September futures have had a pull-back to $7.21 and $7.35 respectively. December corn traded into the $7.80 range and has pulled back to $7.55. It is difficult to know if the top is in or not.

The market is so sensitive that any piece of news can quickly take it much higher. It should be concerning to everyone that any change could send the market crashing lower also. Changes in the livestock and ethanol industries will impact the demand for corn.

Recent announcements of ethanol plants not opening and projects being shelved will change the demand for corn. The supply of corn is in question with the recent flooding in Iowa and points south. Illinois and Indiana had a very wet spring also.

Soybeans have had another good couple of weeks. Futures are up 75 to 80 cents. Soybeans have traded back over $15 again given strength by the weather and Argentine farm situation. Soybeans have also had a pull-back off the top with July and August soybeans trading to $15.75 while September and November soybeans have traded to $15.50.

Soybeans yields are going to be much tougher to project because it will take until August to have a good handle on the flowering and pod setting of the crop.

The market is really in a tough spot. If it continues to push higher because of a number of reasons there will be a severe capital shortage and grain will not be bought as we are used to. Capital was short in the $5 to $6 range and we are pushing $8 corn and $15 to $16 soybeans. To establish a hedge has gotten much more expensive also.

Margin, maintenance money and daily trading limits have all changed because of the high volatility of the market. If you think of the first sales you made, an elevator or grain company has been margining a position on that grain and will continue to do so until the grain is delivered and sold.

The impact of grain prices on the livestock industry has been well documented. The hog industry has been hit hard and there is a lot of pain in the hog business. The poultry industry has made numerous changes, and the latest cattle number indicates changes there also.

Most recently the ethanol industry is also starting to make changes. Newly built plants not opening and other projects being scrapped completely as the industry waits to see what happens with the price of corn and ethanol. All these changes will lead to a larger supply of corn which takes pressure off the market.

The next week or two will be critical to corn and soybean prices.

Calling all readers

The current grain markets’ situation has created a different marketing atmosphere. Tools aren’t being used the same as they were only a year ago, and producers’ options are limited.

With that in mind, what do you want to see from your “Grain Angles” column? What do you find useful in a marketing column in today’s market conditions? Do you feel a column such as “Grain Angles” is still relevant in today’s marketing climate?

Send your comments to The Land, Market Comments, P.O. Box 3169, Mankato, MN 56002 or editor@TheLandOnline.com.

        

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