Corn and soybean futures found lower prices on the Chicago Board of Trade the last few days. Prices were the lowest on early trading Oct. 17 before some relief came with small gains by the end of the day.
In the process, we saw December corn futures hit $3.99, the lowest price since the $3.85 of Aug. 26. November soybeans hit the low of $9.69 1/4, a seven-week low. November soybeans were $9.65 Aug. 26, and $9.55 Aug. 16.
The near-record pace of harvest is contributing to lower prices, as is the reality of huge crops. On days like the afternoon of Oct. 17 and Oct. 21, we have seen good export and user buying that seems like bargain hunting.
Ethanol production has increased the last three reported weeks, ending Oct. 11. If the cure for low prices is low prices, this bargain hunting is the prop that can stop further market erosion.
The U.S. Department of Agriculture Crop Progress Report from Oct. 21 confirmed the fast harvest pace. Ohio farmers have harvested 51% of the corn crop. The five year average is only 27%. Some of the difference is the current dry weather, some is because we started early after dry conditions in late summer. The U.S. is at 65% against a normal 52%.
Soybeans
The soybean harvest pace is similar. Ohio farmers have 76% of the soybeans off, against an average 61%. U.S. farmers have harvested 81% of the soybeans against a five-year average of 67%.
The soybean prices are struggling against the idea of a record crop. That record might not be as high as expected according to one article online Oct. 21. The article suggested that the dry weather pushing the grain harvest is also giving us beans that are too dry. The author suggested that soybeans that were under the maximum moisture might contribute to a 1.5 bpa loss in a 50-bushel yield. While this is true, is also sugests that writers are looking for any small reason to hope that better prices are ahead.
One negative to the soybeans comes from South America. In Brazil, the planting has been held up by dry weather, since farmers there are used to dry weather and fear planting without adequate soil moisture. That thinking has moderated with recent rains, and now planting is catching up.
Last week, the pace went from 8% to 18%, and we are seeing talk about record Brazilian yields for 2025. There is still catching up to do, as last year at this time, Brazil was 30% planted.
Futures spreads
Surely the most interesting online article I saw this week came from Barchart. Author Angie Setzer wrote about how widening futures spreads were an indication of higher cash prices. Let me explain a bit. Futures spreads are the difference in price between different futures contracts.
The current spread between December and March corn futures is a little over 13 cents. That means that even if basis (the difference between local cash prices and the current futures price in Chicago) stays the same, an elevator storing grain can lock in 13 cents of gain for storing grain until cash grain trades against the March futures.
This is a better spread than we have seen, but still not enough to pay the cost of carrying the corn. The more the spread increases, the more the elevator can afford to store grain and carry it ahead on the calendar. The cash prices are being supported if the spread widens.
Setzer’s argument is that there may be three reasons for the spreads to widen. First, the demand may be more than was expected. Remember my idea about cheap grain prices increasing demand (the cure for cheap grain is cheap grain). We may be seeing this now. Setzer writes that early season exports are 20% ahead of last year.
Second, supply may be lower than expected. This would imply that there is not as much corn available as the market assumed.
Third, farmers are holding corn. This could be a reason for lowered supply and would make sense. Farmers are holding all they can because the prices are cheap compared to the last two or three years.
One problem with the farmers holding corn is that it is hard to make a case that is affects the market more than briefly. The market knows where the corn is, and if it is in farmer bins, the market assumes it will come to town eventually, maybe not just right at harvest.
In the meantime, farmer holding can help prices until money pressures or work load planning starts forcing grain out of storage. It is fine to believe that holding corn will help you sell at a better price, but your lender may want his line-of-credit loans paid off after the first of the year.
Also, if you have all your corn to move, it is hard to resist moving a lot in the winter when time is available and when it is convenient to use the money to finance the next crop.
Recent prices
Let’s review the recent prices. December corn futures late on Oct. 21 were trading at $4.07. For comparison, the big high was at $4.96 3/4 May 15. We then dropped to that horrible low Aug. 28 at $3.85. We bounced to $4.34 1/4 on Oct. 2 and then declined to $4.06 1/4 in late trading. We broke back below $4 again Oct. 17, at $3.99.
Meanwhile, the soybeans have recently declined to seven-week lows and then recovered a little. The big high came May 7 at $12.30 1/2. We declined steadily to $9.55 Aug. 16 and then rallied to $10.69 3/4 Sept. 30.
Since then, harvest pressure on futures prices and improvements in Brazil cut prices to the low of $9.90 3/4 in early trading Sept. 15. After losing 25 1/2 cents from Oct. 18 until late trading Oct. 21, we were trading Oct. 22 near $9.94.
Chicago soft red wheat futures, what I like to call cookie wheat because that is its number one use, is now trading, as of the morning of Oct. 22, $5.70 December futures. That is not as bad as the $5.22 of Aug. 26, but it is a long way from our big high of just under $8 on May 28.
In recent times, we had gotten over $6 on talk of drought wheat in Russia and a multitude of problems in Ukraine, but we seem to have slumped after digesting the best news we could find.
