Commodity Price Update

Corn, soybeans, and wheat prices continue to be volatile due to market uncertainty. The most unknown factor is the size of this year’s crop. The USDA has helped paint some of the picture by reducing the U.S. corn crop by more than 200 million bushels between August and September to 13.1 billion bushels. For soybeans the U.S. crop was increased by 50 million bushels between August and September to 3.48 billion bushels.
Exports represent another factor influencing prices. In the September USDA report, corn exports were increased by 50 million bushels and soybean exports were increased by 50 million bushels. With a decrease in the size of the corn crop and an increase in exports (plus a decrease in corn for feed) between the August and September USDA report, ending stocks were reduced by 196 million bushels to 1,116 billion bushels. For soybeans, ending stocks were slightly reduced by 10 million bushels to 350 million bushels.
Corn prices continue to advance higher on 9 month highs. December 2010 corn has broken through $5.00 and is approaching $5.25. Are these profitable prices? Given your yields, are they? – This is the question that needs to be answered. If they are profitable, then selling in small percentages during this rally should happen. Additionally, the corn market is offering a reward for storing (a sign that the traders don’t think we are running out of corn). $0.12 is being offered in the futures market for holding corn from the December contract to the March contract. Taking this plus some strengthening in basis there will likely be a positive return to storage. I recommend locking in the futures side some time over the next few weeks and leaving basis float. Do not ignore 2011 prices, December corn is trading around $4.80.
Soybean prices also continue to advance higher on 9 month highs. November 2010 soybeans are trading around $10.80. Given your yield potential, are these prices profitable? The soybean market is not offering much of a return to storage because the difference between the January and November contract is only $.10 and basis is moderately strong. Keep in mind November 2011 soybeans; they are trading around $10.70.