The big debate among futures and options traders on the Chicago Board of Trade/CME is the direction of grain prices. That debate got revisited Jan. 17 with big jumps in corn and wheat prices. It has been hard to be excited about grain prices recently. Corn for $4 and $10 soybeans do not return a lot of profit. Arguably, $4 corn returns negative net income.
Corn, however, has been in a bull move since the end of August. We traded at $4.03 3/4 Aug. 26 and were most recently (early Jan. 21) trading at $4.90 1/2. We gained almost a dime Jan. 17, had a holiday for Martin Luther King Monday, and are now seeing follow-through on early Tuesday trading.
It is interesting that for the last couple of weeks we have been seeing arguments that the bull move may be getting over, since we have gained over 70 cents since harvest lows. However, the U.S. Department of Agriculture reports from Jan. 10 were bullish for corn, with lower yields and crop production numbers. Then, we had another good Friday Jan. 17, and we are now almost 87 cents above the harvest low of $4.14 in the middle of October.
Of course, the higher we get, the more likely we are seeing the top. In my mind, $5 futures is a tough level to go through. We haven't been that high since the end of May last year. It is significant that the funds are reversing position right now. The last Commitment of Traders Report shows the spec funds are getting shorter. They have sold 6,500 contracts of futures and options lately and 7,500 contracts of soybeans. They are lighter in the wheat by 2,000 contracts. This would be an early indication of a bullish move running out of steam, if the specs are right.
At the same time, the soybeans have been in a downtrend until the last seven trading sessions. We actually had a harvest high a tick over $11 Sept. 30. The trading in the wee hours of Jan. 21 as this was being written has March soybeans at $10.50 3/4. Arguably, we are in a small uptrend for the first time in a while, but still almost 50 cents below that harvest high.
The wheat futures have tended to follow corn and soybeans on the big days, but we do have the first "kill the crop" scare of the season right now. Much of the Plains will have had below-zero temperatures by the time you read this, and we have no snow cover to speak of. That may be why Chicago March wheat futures are up nine cents on the overnight right now, at $5.47 3/4. It is too early to say we have stopped the three-month downtrend, but it is encouraging. We are a long way away from the $6.39 we had for March futures Oct. 3. It would take a lot more bad (for them) news out of Russia and a lot more below-zero days in the Plains to get back there. I would be glad to see the Russian news, but not the U.S. news!
I am reading that, even with the current unpalatable, but improved, prices, farmers are talking about increased plantings of corn and soybeans. There is a little profit at these prices, and that profit may go away.
The best and worst marketing decisions are being made right now. The worst may be by doing nothing, seeing a rally going on and thinking there is a lot of time left. The best may be locking in some of the 2025-26 crop sales while we are here, in case we go lower.
That gets me to the "random thoughts" section of my scattered brain this morning. Here they are, in no particular order:
1. RFK Jr. is stirring a little unease with his pledge to end production of high fructose corn syrup. You may think your soda pop contains a lot of sugar, but it's mostly HFCS. We use up 1.4 billion bushels of corn producing this sugar substitute. We use another chunk producing Splenda. That mostly comes from one Ohio elevator.
2. I saw an interesting article from the Ohio Farmer comparing early planting of soybeans and corn. The question was, "which to plant first?" I noted there was a lot of benefit for early planting of corn and the insurance date for planting soybeans is now earlier. Also, there was little benefit of planting soybeans before May 20 in northeast Ohio. I am betting that there is a benefit in the years we have favorable weather. If I could just guess which ones would be ahead of time.
3. China seems to be going to Brazil for soybeans as a reaction to the Trump presidency, which uses tariffs as a sledge hammer to trade. The last time Trump came to power, the Chinese dropped 2018 soybean buying to only 25% of 2017. And yet, I see some articles about expectations of good trade with China, along the lines of the Phase One Agreement that helped trade and sold them large amounts of corn for the first time.
4. There is a study going on in a port in Lithuania looking at the sale of wheat stolen by the Russians from the Ukraine, a matter that is thought to be as much as a billion bushels so far.
On a personal note, my daughter and her husband, both Buckeye alums, drove from Huntsville to Atlanta for the National Championship game and checked off a bucket list item. It reminds me of the only big trip I ever took with my dad to the 1969 Rose Bowl; we watched the Bucks beat USC and Heisman Trophy winner O.J. Simpson. I am, as you notice, still talking about it.
Sometimes bucket list items are fulfilled in your youth, when you think you have plenty of time with a long life ahead of you, but I still need to sky dive and hike the Appalachian Trail. I am still thinking about the first. I waited too long for the second.