This week’s price action:
| Corn Dec23 down 4.25 at 482.75 |
| Corn Dec24 up 2.50 at 510.25 |
| Beans Nov23 down 18.25 at 1368.5 |
| Beans Nov24 down 17.75 at 1291.75 |
| KC Wheat Dec23 down 38.25 at 724 |
| Hogs Oct23 up 3.40 at 83.125 |
| Fats Oct23 down 1.03 at 180.025 |
| Feeders Oct23 up .40 at 254.3 |
Markets:
As we approach harvest and you are thinking about filling your bins, be aware of how interest rates may affect your plans.
Below is a table showing the approximate interest expense per month for corn and soybeans. If you store soybeans, you will need 10x the market move vs corn just to break even.
If strictly operating on a cash basis, for every soybean bushel you could sell today at $13.25, you could put those proceeds towards a 5% CD, netting + 5.5 cents/month. If you were to carry soybeans to March, you would need a 70 cent improvement (37 cent interest expense and 33 cent CD return) to justify your efforts.
Also be aware, for every 1% shrink in the bin below 13% is equivalent to about 15 cents/bushel lost.
Over the past five years, once corn made it’s post seasonal low (after July 1), futures have rallied into mid-October. Below are the previous moves on a percentage basis.
IF corn were to rally its least (6%) we could be around $5.02 December futures.
IF corn were to rally its average (16%) we could be around $5.50 December futures.
IF corn were to rally its most (26%) we could be around $5.97 December futures.
Weather:
Navigable waterways have been a hot topic lately. Both the Mississippi River and Panama Canal are experiencing low water levels.
The Mississippi River is 46% lower than the three-year average and 24% lower than last year. This system is responsible for transporting about 1.15 billion bushels of corn and 1.0 billion bushels of soybeans every year.
The Panama Canal uses a series of locks to elevate boats along the way. Each lock uses about 50 million gallons of water every time a ship passes through. This water mostly comes from Lake Gatun, which is experiencing low rainfall due to El Nino. There are many boats stacking up and there are reports of ships paying up to $2.5 million so skip the line.
It is extremely difficult to get grain down the river to load out on vessels in New Orleans. Most grain ships once loaded in New Orleans travel through the Panama Canal on their way to Asia.
So, the question is- does the US miss out on export business because we can’t physically execute or does the Western Corn Belt benefit because exports are difficult in the East?
Economy:
Fitch Ratings recently downgraded U.S. Treasury bonds which signals higher interest rates for U.S. taxpayers and borrowers.
The U.S. Congressional Budget Office (CBO) predicts U.S. debt will double by 2040. Gross federal debt has ballooned from $60,000 per U.S. resident to $97,000 per resident since 2016. Interest expense in 2023 will represent about 15% of the entire federal budget. Most expect the FED to hold interest rates steady at their September meeting.
Midwest farmland prices increased for the 34th consecutive month. On average, non-farm investors represent about 17% of buyers, up from about 9% in April 2022.
Commercial property prices in the US are down 16% from their peak in March 2022, with office properties specifically 31% lower.
Something That Means Nothing:
The first Waffle House opened its doors on Labor Day, 1955.