In lieu of actual market direction in this last month of jerks going both higher and lower, market analysts are taking time to look at factors that may affect the market over the next season.
Take your pick: Planted acres, winter wheat condition, war news, South American weather, Chinese demand — all are out there to be discussed, and all have conflicting effects on prices, depending upon what really happens.
The really long-term market factor is the last. Chinese demand was talked about at every outlook meeting I attended for decades. It was always out there in the future and never materialized.
Then, a couple of years ago, we signed a marketing agreement with the Chinese. They surprised a lot of observers by actually fulfilling their commitment and buying large quantities of grain.
China was always seen as a big potential market for soybeans, but last year, especially, they loaded up on corn. That was then, and this is now, as they say.
This year, the corn exports to China are negligible. They have 3.5 million bushels to ship on existing contracts. Last year at this time, they had 374 million still on contract. These numbers are not necessarily indicative of what will happen for the year, but they are worrying.
The Chinese can step up and buy at any point, and they likely will. They may have deferred corn purchases because they hope the prices will be cheaper later. They may be correct.
Even though farmers are hoping to see sales back at the $7 level, it was explained bluntly to me this week that we can currently sell March futures at close to $6.75 (although we have slipped the last couple of days into the $6.60s), and that is close enough.
The current thinking is that fertilizer prices have declined sharply, giving us lower cost of production. The result is margins that farmers should embrace. We have some reasons to believe in lower prices, and we don’t want to miss out. March futures made a nine-week high last week, at $6.883⁄4. That was more than 40 cents above the low of only 10 days before, on Jan. 10. The January high is a benchmark that sometimes is not broken without production problems later in the year. It is typically followed by a February in which nothing much happens.
We broke the corn prices 20 cents in the middle of the week with news of improving weather in Argentina. The dry conditions there have had a recent disproportionate effect on prices. Not only did some of the corn not get planted because the soil was too dry for germination, but as much as half of the corn is in a drought area.
With the recent change of forecasts, that area drops in half. Of course, we are talking about forecasts, and they may not actually get the rain.
The Chinese megatrend that is worth talking about, but will not have an immediate impact on prices, is population. All my life, I have been hearing about the surging Chinese population, and the negative impact it has on quality of life and the economy there in general. Now comes the news that, for the first time since 1961, the Chinese population has declined.
China has taken drastic steps to stop population growth, and the people have contributed to some trends with social sanctions. The government has long had a “one child” policy. A couple is punished for having more than one child.
It took decades to enforce population control, and now it could take a long time to stop the new downward trend in population. It is believed that India will shortly become the world’s most-populous country.
Meanwhile, most of Western civilization is not breeding at a rate high enough to replace itself.
I was discussing this yesterday with a friend who had seven brothers and sisters. My wife’s uncle had 10 kids. I was the fifth and last in my family. Those five only have six kids. Even in my family we are barely holding our own!
Soybeans made a seven-week high early last week, and then broke prices on the Argentine weather forecasts. It is notable that the soybean planting takes place over such a large latitude in South America, whereas here we plant in a relatively narrow geographical range.
This week it was reported that Argentina was nearly done planting soybeans, while the Brazilian harvest has started in the northern regions.
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