These really are days when the so-called “outside markets” and abnormal market influences, tend to dominate. Outside markets are trading issues that are not directly grains, or even commodities.
The value of the U.S. dollar relative to other world commodities, the price of crude oil, and the overall commodity markets, which includes metals, for example, all of these can dominate the overall price of the grains depending on their perceived influence.
The price of crude is an obvious example. The cost of oil affects the price of everything, as it is a major part of the production and transportation of a major part of our economy.
Oil is not just a fuel, eventually. It is also the basic starting point for so many things, like plastics. It is obvious that the war in Ukraine is having a major influence on the price of crude, oil for example.
Dynamic
What is not so recognized, unless you follow the markets closely, is that the price is very dynamic. It was expected that the war would push up oil prices, since Russia is such a large producer, and sanctions have been put on that oil.
In fact, the volatility is not all about the war, since the low for oil futures was back on the first of December, at $65.57 a barrel. That price doubled by early March to $123.70.
You would think it would stay there as long as the war wears on, but on March 15 we were back down to $95.61. Give some credit for the break to more peace talks that were scheduled.
Of course, peace talks currently are based on Putin promising to reduce the country to rubble unless there is surrender — don’t hold your breath.
Last week, crude oil had a $26 price range, while diesel actually traded in a $1.50 range. After all the excitement, diesel actually was down $1.25 from the high.
This volatility in outside markets should warn us that our commodities can vary in wild ranges, also. Sometimes these price swings come when other markets have interesting days.
When oil crashed on March 9, corn futures went with it. The next day we saw the news that the U.S. was getting some of the corn export business, replacing stalled Ukrainian exports, and prices were back up.
Positives
In fact, in a time of fear, we are actually seeing some positive fundamental changes in the market. Yes, we are getting some extra corn business. Yes, we are picking up soybean business that normally goes to South America.
Our U.S. Department of Agriculture reports just drastically reduced soybean and corn crops there because of weather problems, and we are the export beneficiaries.
Then, there is COVID. Aren’t we sick of talking about this? Just when some in the U.S. are making the case that COVID is “over,” whatever they mean by that, we get news that China is locking down large areas to limit the spread of a new variant.
The trouble with the COVID news in China is that it is the reason given for corn prices losing a dime for a while on the morning of March 15. Soybean futures have been down more than 30 cents.
Regardless of the volatility (my favorite word for the last three months), the trends are still up in corn and beans, although the big Ukraine-caused excitement in wheat has soured. And, for the first time, the recent gains are more in the new crop.
Last week, May corn futures gained eight and a half cents, while the December new crop futures gained over 25 cents. In like fashion, May soybean futures were up 15 cents while November was up 40 cents.
Chicago wheat futures actually lost $1.02, as traders came to their senses that the war was not the end to wheat production in Ukraine. May corn futures are trading $7.39 after a high March 4 of $7.823⁄4.
The chart is still positive, though, after the volatility. December futures just made the high, March 14, at $6.58. We were at $6.403⁄4 as this was being written, down almost 12 cents.
