Corn: It has definitely been a wild ride in grains this week. Corn has definitely been on a roller coaster of its own. Earlier this week, corn futures traded north of $4.00 and the nearby month closed at its highest since July. However, corn futures did retreat lower today as corn futures approached the overbought territory as prices began to be met with resistance. Some of the driving factors behind the increase in corn futures is thought to be attributed to the lack of rainfall in key corn growing areas in Brazil. Other contributing factors include an increase in crude oil and higher equities. Both of which are still higher for the week as of the market’s close today. The largest contributing factor may also be the recent surge in soybean futures. Grains are notorious for riding another’s coattails.
As of Monday, about 13% of the U.S. corn crop was planted. September corn futures traded $0.10 higher since last week while the local harvest basis remained unchanged. For those of you with old crop in the bin, if you have been waiting on $4.00 corn to price your old crop, now may be the chance to try and sell at those price levels. A few local elevators have bids that are very close to the $4.00 mark.
Soybeans: For those of you wondering what is happening in the bean market, well, you are not the only one pondering that same question. Over the past week, we have seen November soybean futures increase by $0.49 while the average local harvest basis has remained unchanged. Over the course of the past two weeks, November soybean futures have rallied approximately $0.80. The largest part of the rally is due to speculative traders buying positions in the soybean market. In fact, the volume of trading jumped from below 150,000 contract on Tuesday to north of 300,000 contracts today. That large surge in trading shows the influx of speculative trading that took place over the course of the week.
Another contributing factor to higher soybean prices is the expectation of a lower crop in Argentina. Combine those two factors with a weaker U.S. dollar and you start to see why soybean prices rallied like they did. This rally came very quickly and took place over the course of just a few days. Producers should keep in mind that rallies fueled by the influx of spec trading can leave the soybean market just as quickly as it came. It could be advantageous to layer in additional sales for 2016 at these levels. This is indeed a gift that should not be overlooked.
Wheat: Wheat futures followed corn and soybeans higher earlier in the week. However, as of market close today, wheat futures have closed down from their highs from earlier in the week. This in part due to apparent profit taking as the wheat crop conditions appear to be improving in the Southern Plains. With rain forecasted for the Southern Plains, the crop could receive needed rainfall to keep the condition of the crop favorable. As of Monday, 57% of the U.S. winter wheat crop was rated as good-to-excellent. We should not overlook the fact that July wheat futures have increased by $0.36 since last Thursday. In fact, at a few local elevators, the current new crop bid is above $5.00. This has been a price target for new crop wheat for a few producers. New crop basis at the local level is averaging -$0.07.
Cotton: December cotton futures closed at 62.70. The recent uptick in cotton futures seems to be continuing for now. The rally in cotton prices is being fueled by a rally in the Chinese market. Another contributing factor is the dry weather that Brazil’s cotton producing regions are currently experiencing. Cotton loan options (equities) continue to range between $0.10 and $0.12.
Take Home Message: Producers should not overlook pricing soybeans as new crop prices are near or above the $10.00 mark. Also, producers with unsold wheat can get $5.00 at some local elevators. These price levels are much better than what we have been experiencing over the past few months. I would encourage farmers to review their cost structure to see if these price levels can provide you the opportunity to lock in some profit on a few bushels. Also, for those with old crop in the bin, this recent surge could also provide some good selling opportunities. This recent rally came quickly and how long it will stay is anyone’s guess. We may not know for certain where prices may go, but we do know that prices are higher than we thought they would be going into planting. I would encourage producers to keep that in mind.
Link to local elevator bids: Grain Newsletter 4-21-2016
