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Today’s Prices
Grain markets closed higher today as energy prices surged to new highs and there is concern South American losses may be larger than previously thought.
Weekly Price Summary
Grain Market News
Crude Oil
The energy markets have been supportive for grain. Crude oil posted a new high for the move pushing almost to the $98/barrel market. Crude oil at $88-$89/barrel compared to last year at this time when we were trading at about $52-$53. So certainly, the energy markets are trending higher and supportive for the grain markets.
Unleaded Gasoline
The same is true for gasoline which has pushed to a new high for the move up to $2.57/gal. That is up 70 cents per gallon since early Dec. Higher gasoline prices certainly supportive for ethanol prices as well.
Ethanol Swaps
Ethanol swaps after hitting $3.40/gal plus back around Thanksgiving, still trading at $3 plus at Christmas but has pulled back to a more reasonable price at $2.16/barrel for ethanol prices. With gasoline at $2.57, that means ethanol is 40 cents per gallon cheaper than gasoline and that will definitely spur some additional demand for ethanol.
Ethanol Profit Margins
The fact that ethanol prices have fallen has taken us from all-time record levels profitable for the ethanol plants where they were printing money, now about break even. Ethanol plants had the opportunity to lock in margins all the way through the summer. Let’s hope ethanol plants did lock in those margins and therefore continue to run at a strong pace.
Soybean Crush Margin
Profitably in the soybean crush industry is also very strong. Current board margins above $1.45 per bu. We’re hearing cash margins in portions of the corn belt are running as much as $3/bu profit so extremely profitable which should continue to allow for a strong soybean crush and strong demand from the crush industry.
Live Cattle
Cattle prices have been trending higher for an extended period of time in a very consistent uptrend. A year ago in Jan we had cattle prices in the $1.10-$1.15 level. Now prices are sitting at $138-$140 so cattle prices are quite attractive at this time.
Feeder Cattle
Feeder cattle prices also high. We hit a high of $168 and trading at $159 for nearby feeder cattle but still a very strong market for feeder market cattle. That may be good or bad depending on whether you’re a buyer or seller of feeder cattle.
Lean Hogs
The hog market has rebounded recently from a low of $70/hundred weight back in Dec up to $88 so a nice rebound in nearby hog futures but we are down dramatically from where we were at last summer but still well above where we were at a year and a half ago at $43-$45. Bottom line, hog futures not tremendously high but the rally we’ve seen from $70 to $88 certainly helpful over the last month and a half.
Cotton
Cotton does compete for acres in the U.S. Cotton prices at $125/bale compared to last year in Jan where we were about $82-$83/bale. Certainly going to attract some additional acres in cotton this coming spring.
Sugar
In Brazil they produce a tremendous amount of sugarcane and a large portion of that goes into producing ethanol. Many facilities in Brazil have the ability to either produce ethanol from corn or sugarcane. When sugar prices are high, sugarcane goes to make human consumption sugar. When prices are low and there is not a strong demand for sugar than sugar can go towards ethanol production. Right now, prices for sugar are relatively high, in fact, significantly higher than they were last year in Jan. this means there is an incentive to process sugarcane for sugar versus ethanol and that means more Brazil corn will be needed in their domestic ethanol industry. Items like sugar and cotton may not be the primary driver for our corn and soybean markets but they certainly provide influences on U.S. grain prices.
March Corn Chart
Corn prices surged to new highs today, $6.37 per bu. Early in the week it looked like corn was trying to form a top but today we surged to new highs, so the uptrend is still in place. The long-term trend is still pointed upward. The intermediate trend is still pointed upward and clearly the short-term trend is pointed upward as well. We do want to be a little bit cautious at this time with technical indicators well into the overbought area. Corn prices today closing at $6.36, getting very close to the contract highs that were posted back in May at $6.40.
March Soybean Chart
Soybeans exploded to the upside for the 3rd day in a row posting a high of $14.79. We’ve now made new contract highs and the chart is certainly accelerating to the upside. We do want to be a little cautious here as well with technical indicators now into the overbought range.
March KC Wheat Chart
Wheat prices have been extremely volatile, up over a $1 and down over a $1, etc. Recently we’ve fallen 59 cents off the highs posted earlier this week and unlike corn and beans, the wheat nearby chart is pointed downward with the technicals pointed downward as well. The market has been able to find some support where all of our moving averages converge. If this area can find support and corn and beans remain supportive, a bounce back toward the $8.30-$8.40 range can’t be ruled out but if corn and bean fail to hold the rally they’ve had this week then wheat can very easily see a pullback down towards the $8.60-$8.65 range. Wheat is likely going to be a follower to corn and beans as we head into next week’s trade.
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