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Corn+Soybean Digest

Corn and Soybean Markets To Be Thankful For

Thanksgiving is a wonderful holiday. Family and friends gather to exchange simple gifts of good food and company. Here are just a few of the things we should be thankful for this year.

Thank goodness for early grain sales. Early sales helped you avoid a sense of despair in early September, when cash corn prices reached $2.75 and soybean prices neared $8.50/bu. Many early sellers of the 2009 crop will enjoy cash prices better than $4 in corn and $10 in soybeans.

Thank goodness for long growing seasons. We will set a new record for average corn yields, about 164 bu./acre and 4 bu. better than the previous record established in 2004. Soybean yields should be good(but not great).

Look at our progress over the past 15 years. The 1994 crop was a banner year for U.S. yields. It was our first year with average soybean yields over 40 bu./acre. For corn, it was the first year with yields above 120 and 130 bu./acre. It is interesting to note that our average soybean yield this year will surpass 1994 by just 2%, while corn yields are 18% higher. Technological progress in corn production is more impressive than in soybeans.

I'm thankful for a strong price rally leading up to harvest — for producers who ended the summer “under-contracted” with early sales. Corn prices rose more than 80¢/bu. from early September to late October. Soybeans prices were more than $1 higher than their early October lows. It all adds up to another opportunity to sell $4 December corn and $10 November soybeans futures. How many chances do we need?

BY THE WAY, common sense would suggest that price rallies during the harvest period are rare events. Think again. We have enjoyed substantial price rallies during three of the last four harvests.

I am thankful for the renewed ability to forward contract more than 60 days out. In summer 2008, many producers were frustrated by their inability to forward contract a portion of their 2009 crop. Most grain buyers have eased up their restrictions on contracting. They are willing to talk about new-crop purchases in 2010.

With a 30¢ carry from December 2009 to December 2010 corn futures, many Corn Belt producers can lock in a new-crop cash price of $4 or better on their 2010 corn production. There is no carry in the soybean market but the November 2010 contract is flirting (again) with the $10 mark. I don't know where prices will trend in the months ahead, but I do know that$4 corn and $9.50 soybeans are good places to start.

The harvest rally offers more than an opportunity to catch up on 2009 sales — we can look ahead to 2010.

Thank goodness I am not a hog or milk producer. In the race to see which industry is suffering more in these tough economic times, it's neck and neck between dairy and pork. John Lawrence, Extension economist at Iowa State University, notes that pork producers have operated in the red for 22 of the last 24 months. Margins in milk production are hardly any better.

While we can be thankful it's not us, the lack of profitability in pork and dairy is not good news for corn and soybean producers. Healthy demand is driven by healthy customers. Here's to the hope that their fortunes will turn in 2010.

Ed Usset is a grain marketing specialist for the University of Minnesota Center for Farm Financial Management (CFFM). He can be reached at [email protected]

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