Corn, soybean, wheat prices treading water

Following wide swings in September and early October, the prices of corn, soybeans and wheat traded in relatively narrow ranges in the last half of October.  

Narrow trading ranges reflect the lack of new information and, in some cases, conflicting demand indicators, said University of Illinois agricultural economist Darrel Good.

“Since Oct. 12, December 2011 corn futures have traded in a range of about 40 cents, with a high near $6.65. That contract is now about $1.40 below the late August high,” he said.

According to Good, basis levels remain generally strong and are at record levels for this time of year in some markets. Demand news tends to be mixed for corn.

“Ethanol production since Sept. 1 has been near the level of a year ago, suggesting corn consumption in that market remains at record levels. Spot market margins for ethanol producers have increased sharply since reaching record low levels in June. Calculated margins are near the highs reached in 2007,” he added.

Declining corn prices and higher ethanol prices have both contributed to the improved margins. Ethanol production looks to be large for the next two months, with more uncertainty in 2012 after the blender’s tax credit expires.

“The pace of feed use of corn is not known. Use should be supported by the large number of cattle on feed, but weekly placements of broiler-type chicks continue to run 6 to 8 percent under the level of a year ago,” he added.

Considerable uncertainty about feed and residual use of corn has been created by the surprisingly low level of consumption implied for the 2010-11 marketing year and by the unknown level of wheat feeding. The December Grain Stocks report will shed more light on that issue.

U.S. corn exports are expected to be at a nine-year low of 1.6 billion bushels during the current marketing year, 235 million bushels less than exported last year.

“Exports are expected to be negatively influenced by the large supply of corn and wheat in the rest of the world. Exports need to average about 30.8 million bushels per week to reach the projected level. Export inspections during the first eight weeks of the year averaged 27.3 million bushels per week,” he said.

The Census Bureau will release an estimate of September exports on Nov. 10. Export sales have been large so that cumulative export commitments stood at 806 million bushels on October 20, 25 million larger than commitments of a year earlier.