May corn futures briefly topped $6 this week. While the futures prices didn’t stay above $6 for long, the strong price signals showed up in both old crop and new crop this week.
“When I think about corn, we’re probably getting fairly close to the top,” says DuWayne Bosse of Bolt Marketing. “We might even top out over the next month for the year. We don’t know. What I do know is $6 corn doesn’t come around too often. And $5 December new crop corn doesn’t come around too often, either. So, for our producers out there, it might not be a bad place to do something here.”
Tommy Grisafi of Advance Trading called the market action explosive, but reminds producers how quickly prices have changed recently.
“We were at $5 in 2014 and we stayed below that $5 mark for 2400 days,” says Grisafi. “We went from $5 to $6 in 99 days. What’s making that happen? Incredible demand and just continued weather problems.”
Grisafi says some geopolitical issues are also playing into the markets, especially between Russia and Ukraine. But he says there are still some domestic factors contributing to current prices.
“End users obviously don’t have enough ethanol bought,” says Grisafi. “For the past five or six years, there’s just been affordable product for them. And from a risk management standpoint, the people who got caught, were the people who were short bought. So, we could continue stay explosive, but you have to respect the seasonal trends of the markets.”
Basis levels also improved this week, with some farmers across the country able to contract $5+ new crop corn futures. Bosse says while some are seeing stronger basis levels, it really depends on the area in which a farmer lives.
“It’s probably case sensitive to your location,” says Bosse. “In my area, which I can speak to northeast South Dakota, we had a ton of prevent plant the last two years here, there isn’t a lot of old crop. I’m curious how ethanol plants and soybean crush plants are going to operate this summer.”
Bosse says a mild and fairly dry winter in areas also allowed farmers to haul a large amount of grain.
“The market was calling farmers to go ahead and bring them the bushels, so we did and there’s nothing left up here,” adds Bosse. “But I know even in central Illinois, with the strong positive basis that’s pulling the markets up this past week, maybe there’s just not as much old crop as we think.”
