The direction of the crop markets began the new year where it left off in 2020.

A bull run continues to push prices higher, with futures surpassing $13 per bushel for soybeans and corn reaching close to the $5 mark the first full week of the month.

New year begins with fireworks in crop markets; volatility ahead

Aaron Curtis

“It’s been quite an impressive run,” said Aaron Curtis, commodity risk consultant with MID-CO Commodities. “We’ve seen about a $5 increase in soybean prices and corn is up about $1.50 (since August).

“Obviously, exports have been a big part of that,” he continued. “We also had dry weather in the U.S. in August, dry conditions in South America and Ukraine, and you throw in the appetite of funds to get long (after managed money was short corn by nearly 200,000 contracts back in early August), and there hasn’t been much break in this market.”

USDA recently projected record U.S. corn exports while it cut domestic crop production estimates from 15.3 billion bushels of corn and 4.43 billion bushels of soybeans in August to 14.5 billion bushels of corn and 4.17 billion bushels of beans in November. The stocks-to-use ratio subsequently plunged from 22.5% to 11.4% for corn and from 9.1% to just 4.2% for beans during that time.

“We really changed the balance sheets the last three to four months,” Curtis said. “It (the recent run-up in prices) has drawn a lot of comparisons to 2008 (which featured a jump in corn prices before a 2009 low). We haven’t really had this sort of bull market since that time, although you could throw in the 2012 drought (that also prompted a similar surge).”

The rally greatly altered the marketing plans of many farmers and improved the outlook for crop returns, while stressing end users, such as livestock feeders and biofuels processors, in recent months.

Estimates suggest farmers already sold about 80% to 85% of old-crop beans and 60% to 65% of 2020 corn in the Midwest, with some elevators processing a record amount of deferred payments to begin 2021.

“I feel like most everybody else. I sold corn too early,” said Larry Hummel, a FarmWeek CropWatcher from Lee County. “But there were times last summer I didn’t think I had enough sold (prior to harvest). It’s amazing how things can turn. We’ll take it.”

The markets likely will remain on edge as USDA prepares to release its final crop production estimates, grain stocks, a first look at wheat production estimates and possible updates to exports, among other numbers, Tuesday (Jan. 12).

After that, South American weather concerns will likely hang over the markets heading into spring planting in the U.S., where another possible acreage battle takes shape.

“We’ll continue to see a lot of volatility moving forward,” Curtis said. “Farmers should continue to focus on breakeven costs and selling at profitable levels.”

Trade levels set some new records last year at key exchanges.

The CME Group reached an average daily volume of 19.1 million contracts during 2020, including record volumes of soy oil, metals, natural gas and equity index futures contracts.

Elsewhere, the Minneapolis Grain Exchange reported its second-best calendar year in history with 2.76 million contracts traded, to go along with a record electronic volume of 2.47 million contracts.