The following is from Eric Anderson, Michigan State University Extension educator.
Grain prices are ultimately driven by economic fundamentals: supply and demand. High carryover stocks or a strong U.S. dollar tend to depress prices while less than ideal weather for crop production, growing end-use markets or a weak dollar tend to inflate prices.
Corn and soybean prices this spring have been affected by all of these factors, says Jim Hilker, Michigan State University Extension agricultural economist, who spoke at a recent meeting of farmers and agribusiness professionals in southwest Michigan on grain marketing considerations.
During spring 2016, corn and soybean prices had a significant increase, soybeans more than corn, although corn has pulled back some.
"Corn ending stocks from last year are the highest they have been since '04-'05, and the soybean stocks-to-use ratio is very high at 12 percent," said Hilker. "Combined with a stronger dollar, this has kept prices low over the winter."
However, several changes this spring have put upward pressure on prices: the dollar has weakened compared with six months ago; poor weather in Argentina and political unrest in Brazil have created uncertainty in global supplies; demand for soybean meal has been high; and corn domestic use (beef, hog and ethanol production) is projected to maintain or increase slightly this coming year.
What does all of this mean for farmers?
"Right now, the market for old-crop corn is saying it does not want to pay for storage, so there should be no commercial storage, but you can always move to futures or a basis contract. Old-crop soybean are higher than fundamentals, so I would consider moving them."
For new crop, Hilker says, "I also think new crop soybeans are higher than fundamentals, so pricing 15-40 percent on up days is not too dangerous. For corn, it's more of a mix. I would start to consider pricing some new-crop corn into an up market if you have not already. Be ready to price if the market breaks below these somewhat. If the market starts racing up, don't fight it, watch it go up, then hit it when there seems to be a hesitation."
It's still too early to make planting decisions based on current prices, although Hilker suggested that a switch from corn to soybean on acres "on the margin" may be called for if crop rotations would not be disrupted.
The St. Joseph County Integrated Pest Management (IPM) Breakfast Series is organized by the MSU Extension field crops team in southwest Michigan. The meetings run through the end of June and are held Tuesdays at the Royal Café in Centreville, Michigan, beginning at 7 a.m. Each meeting includes an update of the major field crops grown in the region, including a crop and pest report, followed by a presentation from a guest speaker on a topic important to crop production. Participants can order breakfast and eat during the meeting.
For more information on the IPM Breakfast Series, contact Eric Anderson at 269/467-5511.