After a setback the corn and soybean markets are trying to finish the year strong. The commodity market has been a good place to invest money since September. The market continues to be volatile. The market can sell off hard one day and come charging back overnight and the next day.
The corn market is trying to test the recent highs. March corn had a high near $3.90. The market has traded back to $3.77. July corn is trading near $3.91 with a high just short of $4. A close above $4 in March or July corn is significant. This type of close will probably open the market to the next leg higher.
The market would likely spend time trading in the $4 to $4.50 range. December corn seems to be taking out the recent high around $3.67. A recent close at $3.68 has taken that out. A new crop corn push to $3.75 to $4 will be great. There are many opportunities to sell corn, old and new crop.
Soybeans are not as close to the highs as corn is. January soybeans are around $6.50 with the recent high around $6.90. July soybeans are trading around $6.90 with the high around $7.20. Soybeans need to keep the 2.5 to 1 price ratio to stay competitive with corn.
Recent reports suggest a seven million to eight million increase in corn acres and many of those acres will come out of corn production. The soybean market could see some real volatility in an effort to keep soybean acres in production in 2007. Many times you hear that the soybean market is moving in “sympathy” with corn and wheat. A recent 2007-08 crop year projection put the soybean carry out at least one third less than today’s carry out. Soybeans could be lively this winter and present some great opportunities to price old and new crop soybeans.
Basis levels of both crops are stable. There are no big shifts at the terminal market or southern Minnesota. Local basis levels will be dependent on farmers selling through the winter. Local processors or livestock feeders who need a constant supply of grain will likely push the basis when they need grain.
Most ethanol plants are booked ahead with current corn needs. They will become active if there is another move in corn or the supply in the area is tightening up.
If the corn market starts to take out recent highs it is signaling the opportunity to make sales. The volatility of the market warrants incremental sales to take advantage of the rally. Most advisers are recommending sales once the market moves into this territory. Many are recommending catch-up sales if sales are not to a certain level.
There is no question that if we start to put in new highs the sales need to be made. There is no way to know how high this market can go, corn or soybeans, but being disciplined and rewarding the market help capture higher prices. The corn market has had all the press and action but watch out for soybeans.
Grain Angles is written by Dennis Kelly of LeCenter, Minn.