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Often times we hear about the “February Break” in the grain and soy markets as this can be a time of the year when news of any type is sparse and trade sparser but thus far in 2018, that has not been the case. Spurred on by the ongoing weather issues in Argentina, pressure in the dollar and a nice pickup in demand for corn, these first two weeks of the month have been rather “uplifting.” If we were to close right now, for the week spot corn futures would be up about 6-cents and on track to close higher for the 5th week in a row. Driven by the meal market ( $33/wk) spot beans are currently up 42-cents and pressing against what were the highs posted last summer in the front month. Spot wheat futures are currently up about 9-cents for the week and pressing against a level of resistance that, barring the quick spike higher posted last summer, has stopped this market for well over a year and a half. Let’s do keep in mind that all of these markets remain in very broad sideways patterns, contained within ranges that we have floated back and forth within for more than three years, and more than enough false starts to discourage just about every individual in the race, but we are finally seeing enough pieces begin to fall into place that, indeed that light at the end of the tunnel does not appear to be another train on a collision course this time around. By no means am I suggesting there is nothing but blue skies and warm and fuzzy days ahead as there will and should be a few hiccups along the route, but it does appear we are finally on the right track for higher prices, not just in the weeks ahead but rather, months and years.
You may not realize it, but 2017 was a difficult year not just for the grain farmers as others at the production level have fallen on difficult times as well. It turns out that after riding a golden and foamy wave higher, sales of craft beer appear to have peaked and the resulting decrease has hit hop farmers particularly hard. As with any growth industry, key ingredient suppliers do their best to respond by trying to increase production, and in the case of hops, acreage in the US moved from 30,000 acres and 15 million pounds to over 50,000 acres and production of over 105 million pounds. Of course, it is not difficult to envision what happens to the price of your products when demand turns lower and production higher and over the past year or so, the price of hops has basically been cut in half, forcing more than a few growers into insolvency. You probably did not realize it, but there is an online hop exchange that growers and buyers can conduct business on and I can assure you there are more varieties of hops listed there then you would ever imagine. There may be a light at the end of the tunnel for the hops growers as well though as I understand that in the beer industry, one of the more popular new brews is called a “New England IPA” which requires six times more hops than a regular IPA. That said, I believe that is our duty to help out our struggling brethren who are producing hops and this weekend, those of us who do not abstain from the “barley soda” should do our best to stimulate demand. Prost!