FOCUS ON AG
April 18, 2022
GRAIN MARKET PRICES AT HIGHEST LEVELS IN SEVERAL YEARS
Futures prices on the Chicago Board of Trade (CBOT) for both corn and soybeans in 2021 and 2022 have been at their highest sustained levels since the period from 2011 to 2013. Nearby CBOT May corn futures closed at $7.84 per bushel on April 14, which was the highest closing price for nearby corn futures since early Fall of 2012. Nearby CBOT May soybean futures closed at $16.65 per bushel on April 14, which was also the highest closing price for nearby soybean futures since mid-Summer in the drought year of 2012.
The nearby CBOT corn futures price has exceeded $5.00 per bushel since early 2021 and has been above $6.00 per bushel since early 2022. The corn futures price also exceeded $6.00 per bushel most of the time from late April through June in 2021. Prior to 2021, the nearby corn futures price had not been above $5.00 per bushel since the Spring months of 2014. In fact, from 2015 through 2020, Nearby corn futures were below $4.00 per bushel for a high percentage of the time.
The last extended period of higher levels of CBOT corn futures prices occurred from late 2010 through 2013. Nearby corn futures rose above $5.00 per bushel in September of 2010, exceeding $6.00 per bushel by early 2011, and going over $7.00 per bushel by June of 2011. Corn futures stayed strong in 2012, only briefly dipping below $6.00 per bushel, before reaching the all-time high of $8.38 per bushel during the intense U.S. drought conditions in August of 2012. Nearby corn futures stayed above $7.00 per bushel for the balance of 2012 and remained above $6.00 per bushel for most of the first half of 2013, before dropping significantly in the second half of 2013, ending the year near $4.25 per bushel.
Similar to corn, the nearby CBOT soybean futures price has exceeded $12.00 per bushel since late in 2020 and has been above $13.00 per bushel for all of 2021 and 2022, except for a few months in the Fall of 2021. Prior to late 2020, the nearby soybean futures price had not exceeded $12.00 per bushel since late Summer of 2014. From 2015 through early 2018, nearby soybean futures traded between $9.00 to $10.50 per bushel, with a brief period above $11.00 per bushel in early Summer of 2016. From mid-2018 through mid-2020, nearby soybean futures traded below $9.00 per bushel a majority of time, due to export market implications resulting from the U.S. trade war with China. Since the China export markets returned to more normal patterns in mid-2020, soybean futures have remained above $10.00 per bushel.
During the last grain price “boom period” from late 2010 through 2013, the nearby soybean futures rose above $12.00 per bushel in October of 2010 and exceeded $13.00 per bushel the end of 2010. The nearby soybean futures stayed above $13.00 per bushel throughout the Summer of 2011, before falling back below $12.00 per bushel that Fall into early 2012. Soybean futures rebounded quickly in the drought year of 2012, exceeding $13.00 per bushel by March and $16.00 per bushel by July, reaching the all-time high of $17.68 per bushel in September of 2012. Nearby soybean futures remained above $14.00 per bushel until the Summer of 2013 and remained near or above $13.00 per bushel for the balance of 2013. After spending the first half of 2014 above $13.00 per bushel, nearby soybean futures dropped below $10.50 per bushel during most of the second half of 2014.
The current strength in both the CBOT prices and the local cash grain prices for corn and soybeans has been driven by a combination of fairly tight U.S. and World grain stocks, very strong domestic and export demand for both commodities, lower than anticipated U.S. corn and soybean production in 2020, and lower than expected 2022 corn acreage projections by USDA. The commodity markets have gained further strength in recent months due to the impacts on World grain markets resulting from the Russian invasion of Ukraine, as well as some corn and soybean production reductions due to 2022 drought conditions in South America.
The basis for local corn and soybean cash bids has remained at fairly tight levels in 2021 and 2022. The “basis” is the difference between the local cash price being offered in a given month and the closet CBOT futures price. Many processing plants and local elevators in the corn belt have offered cash prices with a positive basis at certain times during the past eighteen months. The basis level for soybeans in Southern Minnesota for Fall delivery in 2022 remains quite tight, with the soybean basis level at $.05 to $.20 per bushel under the CBOT price at soybean processing plants. Soybean basis during planting season from 2016-2019 ranged from $.40 to $.60 per bushel under CBOT futures prices at processing plants and $.70 to $.80 or more under CBOT prices at local grain elevators. The corn basis level for 2022 has widened out somewhat in recent weeks and is now at approximately $.30 to $.40 per bushel under the CBOT price at local ethanol plants, which is more typical of Spring corn basis levels. The basis level is important to farm operators for determining pre-harvest market strategies.
Many farmers will tell you that grain marketing decisions are one of the hardest parts of farming. This is especially true during times of highly volatile markets such as have been occurring in the past couple of years. Forward contract cash corn prices for harvest delivery last year rose above $5.00 per bushel in the Spring of 2021, which was the first opportunity to forward price “new crop” corn at a local price above $5.00 per bushel since the Spring of 2013. Many farm operators took advantage of this opportunity and started “locking-in” a contract price on their 2021 corn crop well before harvest. Since the beginning of 2022, the cash corn price has been above $6.00 per bushel, exceeding $7.00 per bushel much of the time in the past six weeks; however, a significant percentage of farmers had already sold all of their 2021 corn by early 2022. Farmers that still have unpriced 2021 corn stored on the farm are now wondering how high corn prices might go before there is a major downward correction.
Once farm operators get near planting season, they pay close attention to “new crop” December corn futures and cash prices for harvest season and beyond at local grain elevators and processing plants. December corn futures closed at $7.35 per bushel on April 14, which at the highest planting time price level since the drought year of 2012. Cash bids for Fall delivery of the 2022 corn crop at local grain elevators and ethanol plants in Southern Minnesota on April 14 ranged from $6.50 to $7.00 per bushel at many locations. In late Fall of 2012, local new crop corn prices for the Fall of 2013 were near $6.00 per bushel; however, by July of 2013 new crop bids had declined below $5.00 per bushel, with the 2013 cash corn price ending the year near $4.00 to $4.25 per bushel.
Prices for 2022 “new crop” CBOT November soybeans closed near $15.00 per bushel on April 14, with new crop soybean futures trading above $13.00 per bushel since early in the year and exceeding $14.00 per bushel since mid-February. A year ago in mid-April of 2021, the new crop soybean futures price was near $13.00 per bushel, staying mainly between $13.00 to $14.00 per bushel until September, and then dropping below $13.00 per bushel until late in the year. Cash bids for 2022 new crop soybeans at grain elevators and processing plants processing in Southern Minnesota on April 14 ranged from $14.00 to $15.00 per bushel. The current new crop soybean bids are the highest since the summer of the drought year of 2012. New crop forward contract soybean bids exceeded $17.00 per bushel at some locations briefly in late Summer of 2012, before dropping back to a cash soybean price near $14 per bushel by year-end. By the end of 2014, cash soybean prices had declined to near $10.00 per bushel.
Most producers have been pondering over grain marketing decisions for the 2022 corn and soybean crop in recent weeks. Being able to “lock-in” local cash prices over $6.00 per bushel for corn and near $14.00 per bushel for soybeans is the best opportunity that has existed at Spring planting time in many years. On the other hand, farmers do not want to miss a grain price “run-up”, such as occurred in 2012. It is important to remember that the catalyst that drove the rapid 2012 commodity price increase was a major U.S. drought that developed in mid-Summer. If a major drought does not develop in 2022, corn and soybean prices are likely to follow a more typical seasonal price pattern as we progress toward harvest. No two years are the same, but obviously these historical price trends are something to keep in mind in analyzing 2022 grain marketing strategies.
******************************************************************************************
Note — For additional information contact Kent Thiesse, Farm Management Analyst and Sr. Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960) E-mail — kent.thiesse@minnstarbank.com) Web Site — http://www.minnstarbank.com/