Another year is just about in the books and it was yet another up and down ride for the grain futures markets. Soybean prices escalated even when the market looked for a drop after a disappointing South American crop and the expectation of larger U.S. plantings.
“Last May prices were pretty low, and then up until October soybean prices have just been going up and up and up because the U.S. became the supplier to the world,” says analyst Tom Fritz at EFG Group in Chicago. “Now we’re back in the cycle of looking at South America and what kind of soybean crop they’re going to have. Are they going to have a good crop? Right now they’re off to a really good start.”
Further into January we will have a better handle on the South American crop and the final say from USDA on the U.S. crop size. That report is due on the 11th and Fritz believes bean prices might be negatively affected.
“I’ve got a sneaking suspicion come January 11th on that final production update you’re going to see we have more soybeans than anyone thought which in turn is allowing our sales pace. And if the weather stays good for South America I think springtime for soybeans prices could get a little gruesome compared to where we’ve been.”
Early in 2012 U.S. corn prices were well below current levels, but a steady climb put U.S. corn in overpriced territory.
“Brazil had an outstanding corn crop last year, the best corn crop they ever had. Remember that was their second season corn crop. We have no clue what their second season corn crop’s going to be like this year. But last spring Brazil had a tremendous corn crop, more than offset the shortfall out of Argentina. We were going to plant the bejeebers out of corn last year, and if you recall corn prices here last May were flirting with $5. Then we rallied up and knocked at the door of $8, and then all of a sudden where’s the demand? We’re overpriced in world circles.”
But Fritz thinks the demand window could open up in the early part of 2013 as Brazil, South Africa and the Black Sea areas start running short on supply. But he says it will be a short opening as South American supplies come back once again.