Mark's Market Talk

The commodity markets closed out October with a bang last week as December corn was 30 cents higher while November beans were 15 cents higher. Higher ethanol margins and inflation fears were drivers in the corn market. Higher crude oil is pushing the price of ethanol higher which is giving the plants one of the most profitable times they have ever seen. A year ago, most of these plants were losing money and there was a lot of talk of slowing them down. Now that people are back driving the demand side is really taking off and it appears the USDA will need to add some more grind into their numbers in next week’s WADSE report. The inflation talk seems to be real as almost everything you buy today is higher than what you paid a year ago. This week the government pegged the annual inflation rate at 4.4 percent. However, many think this number was understated and it may have been closer to 6 and is growing. We haven’t seen this for many years. A little inflation is good, a lot of inflation can be bad. In the meantime, funds use investments such as the commodity markets as a hedge against inflation. The price of energy is one of the prime indicators of inflation. Corn and soybeans are both energy sources, so it makes sense that we are seeing a runup in prices. Whether this will last depends on world oil prices. This isn’t just crude oil. The US and other countries are promoting cleaner fuel and that is expanding the use of veg oils in diesel fuel. These same oils are used in food production and competing factions are after the same products. Bean processors are also doing well and that is reflected in the narrow margins the interior plants are offering for beans as they continue to make almost record crush margins. All of this is leaving producers asking what to do with the balance of their crop. It appears corn has put a harvest low in and is breaking out to the high side. If the things mentioned above stay in place corn could get higher. With the high cost of inputs, the market will need to push farmers to plant corn. The flip side of this is will farmers plant more beans and push our carryout above 500 million bushels and push bean prices lower. The only viable answer today is maybe. Other crops such as cotton and wheat will draw some acres from corn so to say that the total switch will be to beans will not hold true this year. So as always you will need to stay informed and take advantages of some opportunities that might be presented. It is better to grab a piece of an increasing market rather than say later I could have or should have.