Mark's Market Talk

Jan 04, 2021

It is a lot more fun to write this article when everything is headed higher. We had the second 4-day week in a row and yet the markets acted like everything was normal. Let’s start with beans. March beans ended last week 48 cents higher and 1.43 higher for the month of December. The rally that started 3 months ago continues an upside spiral. Strong export demand has brought us to this point as we have exported a billion more bushels of beans then we had at this time last year. Domestic crush remains super strong as oil and meal demand has been excellent. So, the question of the month has been why can’t we get 12.00 for new crop beans? The short answer is the trade is concentrated on the old crop as they have more answers for this time frame. South American weather is still a wild card and a 3- or 4-bushel yield swing either way can steer this market. Brazil will start harvest in a couple of weeks and as they start loading ships, we will lose the China market until late summer. However Chinese corn demand is pushing corn prices higher as it appears, they will need lots of corn and we have the world supply for the next 5 months. March corn was 35 cents higher last week and was 60 cents higher for the month. I have said for some time that corn was a sleeping market as it struggled to keep pace with beans. Now with exports starting to add up and a steady domestic demand we are making up ground in a hurry. It also helps that basis levels are staying very strong for this time of year. This could easily continue thru the summer as corn supplies in the state of Iowa took a hit due to drought and wind. An extra 10 to 15 cents of basis on top of strong board prices makes you glad to be a corn farmer. The object now will be to make sure we don’t end up selling 3.50 corn because we were waiting for 5.50. So, we close out one of the toughest years most of us have ever seen. Better commodity prices the last couple of months along with some nice government checks will keep most operations viable. We still need to concentrate on planning. Many thought we had entered a new price level in 2012 as we reached prices like what we are seeing today. We all know how that worked out and it led to several rough years as prices fell hard and stayed depressed for a long time. I bring this up to remind us not to ignore new crop prices because we think they are way too cheap compared to what old crop is worth. If you cannot make money selling some 10.50 beans or 3.80 corn, you may want to change jobs. I am not advocating selling the whole crop, but these might be levels to consider starting some sells and work yourselves higher. Then when the bubble starts leaking you have a base under you. Happy New Year.