Mark's Market Talk

Dec 06, 2021

The grain markets have been volatile for well over a year. Last week was no exception as we rode a roller coaster all week. The week started out with the new type of Covid grabbing the headlines as the initial reports were that it was more dangerous than the Delta virus and this sent shock waves thru the financial markets. Just about everything was big time lower lead by a big drop in crude prices. The sell off continued Tuesday and then we reversed some Wednesday when the news said the new variant might be less harmful. Sometime late Thursday it was announced that it had been found in the US and so we were braced for another big sell off Friday. But instead, we had a good up day in corn and beans. For the week March corn was 8 cents lower while Jan beans were 14 cents higher. The strength in the bean complex is somewhat unexpected. World stocks have rebounded since bottoming out last summer. The South American crop is not under any great stress currently. And the trade expects more beans to be planted here next spring. However, there is a shortage of other oil seed crops in the world and that is bringing a great demand for soy oil. Food companies throughout the world are facing supply issues and steeply higher prices for edible oil. They are asking the US EPA to lower the biofuel standards to help ease the supply crunch and lower their input costs. This would harm the US farmer who is benefitting form this demand. Bean crushers are loving it also as they have never made money like they are right now. There is still more to come on this story. Corn has been the middle child in the big 3 grain commodities. Wheat is thought to be the leader as world supplies of quality wheat is low. So many think corn will follow wheat higher. Crude oil has also been a leader and has made the ethanol business very profitable. If we can avoid any new covid lockdowns it appears gas consumption will continue to grow as Americans return to normal driving patterns. Basis levels remain strong and the lines at the processors have been short as the crop has been put away and apparently enough was sold to tide most producers into the new year. The carry into summer is really lagging normal times. It will pay to keep an eye on this as basis will widen once a lot of grain starts moving in the country. That could be shortly after the first of the year when the next money need will hit most farmers and the trucks and wagons come back out of the sheds.