Corn and soybean prices have been quite erratic this spring, due to tight supplies of soybeans, increasing supplies of corn, stable demand and changing weather conditions across the country. Nearby corn futures prices on the Chicago Board of Trade (CBOT) dropped nearly $1/bu. since early April, while nearby soybean futures prices dropped by over $1/bu. since late April. Local cash prices and new-crop prices at grain elevators and grain processing plants have not dropped as significantly, due to strong local basis levels, which have been maintained by very tight grain supplies, and continued strong short-term demand.
There has been even greater pressure on the 2012 new-crop corn price due the increase in U.S. corn acreage – an estimated 2012 U.S. corn crop of well over 14 billion bushels – and corn carryover levels expected to increase to the largest levels in several years by the end of 2012. On June 15, CBOT December corn futures dropped to $5.11/bu., the lowest level of the year. Local 2012 corn prices dropped to the $4.60-4.70/bu. range, which for some producers is probably approaching their breakeven level to cover all 2012 crop input, land and overhead costs for production. New-crop corn price movements in the coming months will likely be highly dependent on weather conditions and crop prospects in the major corn growing areas of the U.S.
The current break in prices may be a signal for farmers with 2011 corn and soybeans in storage that is not priced to sell remaining grain inventories. The current basis levels for corn are at best levels in recent years. Much of the 2011 grain that is now being delivered to grain elevators and processing plants was priced in 2011, or earlier this year, at price levels well above the current price.
It appears that far less new-crop 2012 corn and soybeans have been forward priced for delivery following harvest, as compared to the past few years. Most farmers are hoping for a market rally into harvest, as we have seen a few times in recent years, and probably looking for corn prices back near $6. However, the increased corn acreage in 2012, along with any favorable weather conditions, may keep that market rally from occurring in 2012. Corn producers may want to watch for any market rallies in the next few weeks to “lock-in” a price on some of their 2012 corn crop. Soybeans may offer better opportunities for a market rally later in the year, due to much tighter U.S. and global supplies of soybeans, and more moderate planted acres in 2012.
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at firstname.lastname@example.org.