For weeks, we have talked about volatility in the grain markets. This is, by definition, a large range of prices in a short time. Volatility that is regular overtime becomes just background noise in the market sound. Now, it just feels like prices are erratic.
Given the uncertainty and fear in the pricing mechanism known as the futures markets, it should not surprise us that we now expect large swings in prices in short periods of time. The price of crude oil is expected to get to $120 a barrel. Then, it is seen to go back below $100. Now corn and soybeans are taken to levels seen rarely in history but on a regular basis.
I am so old that I remember when farmers who felt like speculating would just bet on seasonality. That is, they bought the markets at harvest and sold them a few months later. The bet was that prices improved with time during the year, and it was generally a safe bet. It was a big deal to see corn prices move a couple of cents in a day. Those days are gone.
Last week, July corn futures gained a nickel, but December futures were down almost 11 cents. We treated the price change like it was a surprise that it was small. We talked about how the market was better during the week but was disappointing Friday.
Time was when a change like this would have been a big deal, but instead we struggled to comment on the small reaction to market forces for the week.
At the same time, July soybean futures gained almost 33 cents, and the November futures were up almost four. Big deal.
There was actual news that was not from Ukraine. Indonesia is putting a ban on Palm Oil. Yawn. We had a large soybean sale to Mexico, and sales to “unknown” destinations, which is code these days for “China.” So what? Chicago wheat futures lost 29 cents, and the reaction is that we are not getting any of the wheat business lost in the Ukraine mess.
Events that used to shape our world, and our markets, are now shrugged off. We are focused on the war in Ukraine, and we are surprised that we have struggled to break through $17 soybeans. New beans had not broken $15 until the last few days, and we are surprised.
Delayed planting
Lost in the chatter that used to be significant news is the fact that the spring planting season in this country is being delayed by cold weather that has been too cold and wet in the East, and, until recently, too cold and dry in the West.
I have heard first-hand accounts of dust storms large enough to disturb traffic on some interstates in the Western Corn Belt. Recently, however, some very dry areas have gotten soil structures refilled with moisture from snow and rain. The temperatures remain cold, however.
While we have gotten jaded with regular bits of what used to be huge news, it is notable that scattered isolated areas where farmers have planted some corn and, under modern regimes, some soybeans are talked about because they are rare.
The farmer who planted 600 acres of corn last week near Kansas City is worried that he is too early for conditions, but glad he is far enough south that he may get away with it.
We used to think we planted corn in early May. Now we want to finish in early May, and it is not going to happen this year. Weather forecasts for the next two weeks are not encouraging. Farmers in some areas are already hunting for short-season corn varieties.
In fact, the corn market fell the end of the week in spite of positive market news. We are delayed in planting. We did see significant exports. Maybe the market is just tired, and needs a correction.
Futures
Futures markets are, by definition, an estimate of value in the future. They are susceptible to fear of the unknown. When the unknown becomes accepted as commonplace, as we are now getting comfortable with war news just being more of the same, the fear that drives prices ahead of reality is lessening.
The soybean market, which is driven first by any speculative news, has not been our leading market. The high prices there are more a function of production problems in South America than production and export problems in Ukraine. Ukraine is a wheat and corn problem. News of export sales to China that normally would be going to Brazil continue to fuel markets, but not yet to new highs.
A look at trends tells us that this current war event is a corn market more than a soybean one. July corn futures had a recent high above $8. Soybeans have only recently gotten anywhere near the high in late February that resulted from the first shocks of the Russian invasion into Ukraine. July futures touched $17.34 April 22, with the November at $15.41
Meanwhile, July corn futures touched $8.193⁄4, April 19, and the December was as high as $7.55 the same day.
