Strong Grain Markets Continue

The corn and soybean grain markets have continued to be very strong in recent weeks, with the futures markets at the Chicago Board of Trade (CBOT) continuing in an upward pattern. The last time we saw this type of grain market scenario, especially in corn, was in the fall of 1995. December CBOT corn futures were trading near $3.30/bu., and November CBOT soybean futures were close to $6.40/bu. on Oct. 30. This compares to about $2.30-2.35/bu. for December corn futures, and $5.35-5.40/bu. November soybean futures in mid-September. Local cash bid prices for corn in Southern Minnesota had risen to $2.80-2.85/bu. at many locations on Oct. 30, which represents the highest harvesttime cash corn prices in several years. Cash corn prices at most local grain markets in Minnesota were below $2/bu. from early summer though late September. Most cash soybean prices at Southern Minnesota Grain Elevators were about $5.70-$5.80 per bushel on Oct. 30, which are close to the highest soybean price levels of calendar year 2006 at most locations.

By comparison, a year ago at this time on Nov. 7, 2005, The December CBOT nearby corn futures were trading at $1.94/bu., the local cash corn prices were $1.35-1.40/bu., and there was a $.45-.50/bu. LDP on corn. On that same day, November CBOT nearby soybeans futures were trading at $5.80/bu., and cash soybean prices were $5.35-5.40/bu. at most locations, with no LDP on soybeans.

Interestingly, some corn producers may have actually ended up with a higher gross value per acre from their 2005 corn crop than they will in 2006, at the current price levels. In 2005, many growers had forward priced a significant amount of their 2005 corn production at $2.20-2.30/bu. Once the $.45-.50/bu. LDP was added on, they had a net corn price of $2.70-2.80/bu., which is very similar to current cash corn prices. However, most growers had corn yields that were 10-15% higher in 2005 than were achieved in 2006. In addition, many growers had already forward priced some of their 2006 corn crop at $2-2.30/bu., prior to the current price rally, which started in late September. That means an even lower gross return per corn acre, compared to 2005. Of course, producers that have all their 2006 corn in storage, and have not locked in a market price, have also not established their final gross revenue per acre at this point. It could increase even more, or the revenue could drop if corn prices decline.

The good news for producers that regularly forward price some of their anticipated production, prior to planting and during the growing season, is that there are some good opportunities to begin pricing the 2007, and even 2008 corn crops. Most cash corn market bids for the harvest season of 2007 are above $3/bu., which is a very strong price level a year before harvest. The last time that these type of pre-plant pricing opportunities existed was in fall 1995, prior to the 2006 growing season. That year, the strong corn prices continued into early spring 2006, then dropped rapidly until harvesttime in 1996, reaching the CCC loan rate or LDP threshold by the late fall of 1996.

Will that happen again? Most grain market analysts don’t think so, due to the high corn usage for ethanol production and strong export markets. However, October 2007, is a long time away from a grain marketing standpoint, and a lot can change in the coming months. It may not be a bad time in the coming weeks to take advantage of the very strong corn markets for selling some of the 2006 grain inventory, and to “lock-in” market prices for the 2007 corn crop.

Tragic Farm Accidents
In the past couple of weeks, there have been several tragic farm accidents in Minnesota that have resulted in death or serious injury. Late fall is a key time for farm accidents, due to the shorter day length and the extra stress of trying to finish up fall field work before winter weather conditions arrive. The general public also needs to take extra caution around slow-moving farm machinery and trucks when driving on State and County Highways during the Fall harvest season in farm-country, especially early in the morning and in the late afternoon. A little extra caution can go a long way in preventing a tragic farm or traffic accident in the fall season.

Editors 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 kent.thiesse@minnstarbank.com.