Grain Angles: Soybeans’ strong run continues

January 18, 2008 12:53 pm

— If you have been paying attention to the presidential race, the buzzword is “change.” All the candidates are using it. The buzzword in the grain markets for 2008 will be “volatility.”
The bottom line is there is nothing for sure no matter if you are running for president or trying to market grain. Old indicators are getting foggier each day so decisions are made based on the best information we have today.
The corn and soybean markets are strong. Jan. 2 the market took off from where it left off in 2007. March corn is up another 29 cents in the last two weeks. All corn contracts are up about 30 cents in the last two weeks. July corn is trading around $4.87 while new crop is at $4.86.
The market has been strong since September 2006 but since early October 2007 the corn chart has been on a strong march higher. The December 2009 and 2010 new crop corn contracts are trading around $4.75, which is unusual in the normal grain business.
January soybeans are up another 89 cents in the last two weeks as well. July soybeans are pushing the $13 mark. Soybean prices are at all-time highs. Soybeans have been strong since early October also. Soybean prices seem to have a tight relationship with the price of a barrel crude oil but now are seeing strength because of food grade oil supplies in question also.
Weather in South America has not been the best, which is leading to questions about the supply of soybeans coming from that part of the world. The original projections were a record crop in South America but that will probably change this winter.
The tough part of this market is that many things influencing it are not closely tied to agriculture. The first week of the year had enormous amounts of fund money flowing into the market which is pushing the market to levels that probably are not justifiable on supply and demand alone.
Producers need to stay focused on their profit margin. There is no question that costs have escalated, putting pressure on margins. Many questions can be answered when reasonable profit margins are reached. Marketing is made easy when margins are achieved that make everyone comfortable.
Trying to pick the top has gotten extremely dangerous. The corn market is pushing the 1996 highs and soybeans are at 34-year highs. History says the market normally does not spend a lot of time at these levels so it is important to take advantage of the opportunity. Remember that the market is heavily influenced by things other than agriculture and it is difficult to know when those factors will change.

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