Posted by: usset001 | February 5, 2010

The January crash in grain prices

Mar'10 corn futures

I received a question via email a few days back and it begs for a response from your “to busy to blog” blogger.

How is your winter going for you?  Just curious on what your take is on the current grain market situation & the January crop report. Unfortunately, we have quite a few guys still sitting on large inventories of corn & soybeans.  Did USDA take into the account the light test weight, high moisture corn when considering the 9-10% unharvested acres (over 40% in ND). I look forward to hearing back on your insights, etc. Thanks.

January was an ugly month. Let’s review the numbers. Cash corn prices fell 60 cents per bushel in January. Cash soybean prices were down about $1.40 per bushel and spring wheat prices in the Red River Valley fell about 70 cents. All-in-all, about a 15% decline in grain prices in one month. Unfortunately,we can’t point to this as an unprecedented event because we’ve seen this sort of monthly volatility several times over the past three years.

My travel schedule is very heavy this winter (hence your “too busy to blog” blogger). But travel allows me to talk with (and listen to) hundreds of grain producers throughout the Upper Midwest and here’s my take on the January price debacle, as gleaned from a number of random conversations. The January downdraft  in grain prices was even more painful than might be expected for two reason; (1) grain prices started the month at modestly profitable levels, and ended the month at levels that make the average grain producer wish he had settled for modestly profitable and, (2) the sudden realization by too many producers that the price crash was having a direct impact on not one, but two crops – old crop from the 2009 harvest held in storage and new crop 2010 values (falling at rates nearly equal to old crop).

This second point – the idea of losing money on two crops and not just the one harvested late in 2009 – is a rich topic that demands further exploration. When does a new crop become relevant? I think I just found a topic for my March column in Corn & Soybean Digest.


Responses

  1. Ed, Did you make the 10.05f sale for the 2010 soy crop the first week of jan.?

    • Yes, I did. I made two sales, actually, with Nov’10 futures at the $10.20 mark.


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