More people in Box Butte County are talking about soybeans these days so I thought I would include a little market information. Export loadings are up from last week but are still 11% behind last year and 8% behind USDA estimates. Informa increased their soybean planting acreage estimate by 2.5 million acres from 2015 on Tuesday with some acres shifting from corn to soybeans. The shift in acreage may be due to a possible mass exodus of producers from corn to soybeans because soybeans are cheaper to grow. Returns for soybean, although still negative, are currently better than corn and could be considerably better if weather does not cooperate and yields move back to average from the high levels we have seen the last two years.
There has been a welcome $0.18 rally over the last 2 weeks bringing corn back up to a $3.20-$3.25 cash price range but it is being offset by weakening basis levels. The rally has been attributed to short covering of managed money that was short 195 thousand contracts on Friday. After the funds stop buying, we will need another reason for them to continue buying corn contracts to drive the prices up. We have seen some corn movement across the country but mostly from elevators moving corn in preparation for the coming year. Producers are still not selling and are instead taking advantage of delayed pricing programs in order to let the elevators move the grain.
I have been talking about the El Nino/La Nina pattern and its importance to 2016 prices. El Nino is attributed to granting our excellent yields over the last two years and has recently started moving to a neutral position. If it stays neutral for another year then we will probably see good yields again, however, if it moves into a La Nina, it could result in drought conditions and cause reductions in supply. Unfortunately, this is what is needed to drive prices up to profitable levels.
The first chart below is an interesting chart of the El Nino/La Nina pattern with an overlay of corn futures. When the gray line is above the horizontal black line, it is a strong El Nino and when it is below it, it is a La Nina. As you can see, there is an inverse relationship between the El Nino/La Nina and corn futures. The second chart shows seasonal December corn futures in years with high carryout similar to the 2016 year we are currently entering. The transition to a La Nina event occurred in 2007, going into 2008 and in 2010 and the impacts on prices can be seen in the second chart. It is interesting to compare the two charts and one conclusion I can make is that unless we transition to a strong La Nina, the highest prices we see for new crop may be in the February-March period. It may be a good idea to forward contract some during this time period to reduce your risk.