As this year’s late crop season comes to an end, we take a moment to look at what this fall may bring for prices. The end of the summer demonstrated that both corn and bean worldwide stocks and U.S. yields are higher than projected. Some of this is due to the warm and dry conditions that we have received the past couple weeks that have pushed the U.S. crop towards maturity. While this would generally cause us to lose hope of a fall uptick in prices, there are some factors in today’s market that support stability and possibly a slight upward trend.
A growing demand for U.S. corn and soybeans seems to be gaining momentum in today’s market. The U.S. dollar value has lowered, making it easier to export, and the Baltic Dry Index (BDI) is rising, demonstrating that there is a renewed sense of global demand. The BDI is considered the leading indicator of future economic growth. The largest global importer of commodities in China has made major purchases in the past couple of weeks. When China’s economy begins to perform as it did in 2013-2014, so does their demand for food with higher protein content. This not only bodes well for corn and bean markets, but for beef and dairy markets which tend to follow.
On the positive side for supply suppression, we are watching the impact of major weather events that hit the U.S. in the past month. There are multiple reports and articles out of the Mid-south and Mississippi Delta that discuss damage to the soybean crop in those areas. This is a key item to watch as it can cause major volatility in the commodities market. If there are actually a large number of bushels that are “destroyed” as we get into harvest, this would cause a well-defined up-tick in the price. On the other hand, if the crops are damaged, we will see an influx of these crops to hit the market as producers don’t generally try to store damaged crops. A flood of damaged bushels would cause a nationwide basis spread. This is something producers should watch closely as it may pay to store commodities until spring if you can.
Although globally we are seeing some market support on the supply and demand side, one major challenge is that locally we are looking at record basis numbers. Currently on the local market we are seeing soybean basis in the area of -$0.85 to over -$1.00, while corn numbers are better, we are experiencing from -$0.32 to -$0.65. These figures are due to the same excess supply that we dealt with last year at this time. The market is still relatively flooded, not only locally with stocks, but nationally. It will be important to watch here in western Wisconsin as we start to see near-record yield levels like we did last fall, these numbers could worsen for producers.
In synopsis, there is little to show that there are any market forces that would drive the markets a lot higher than they sit today. The fall corn prices have only traded in a 17 cent range since the start of August. The good news from this is there isn’t much to push prices any lower than they are today. The bad news being, while some of the market forces discussed above show support, it isn’t a lot of support, so we most likely won’t see any major upswings either.