At Larry Wood’s grain elevator in Champaign, higher prices for corn and soybeans usually produce a flood of selling from farmers rushing to cash in.
Yet even after a rally stretching on for months, the talk among the area’s top producers is mostly about prices going higher still.
“They are the perpetual optimists,” said Wood, general manager of the Andersons Inc. facility, where farmers store their grain for market. “When it comes to price, it’s always going higher.”
Winter is bringing a warm and fuzzy glow to the heartland, as powerful demand pushes the value of basic commodities to the most robust levels in years. Everything from ethanol fuel production to a burgeoning hog population has contributed to a mighty rally in grain and oilseed prices.
Along with demand, scarcity is helping too. On Tuesday, a government report showed that corn and wheat supplies will be smaller than previous forecasts, and soybeans are on track for some of the lowest stockpiles since the 1970s.
But with prices already substantially higher, the market is entering precarious territory, some analysts say, and traders expect volatility ahead.
“It’s a market that is strong, but fragile too,” said Don Roose, president of U.S. Commodities in West Des Moines, Iowa. “Anything that spooks the market, you will have some profit-taking.”
Indeed, a relatively tiny outbreak of avian flu in Delaware cast a pall on trading during a choppy session Tuesday, with prices at the Chicago Board of Trade finishing lower in spite of the bullish crop report.
“There’s a lot flying around here,” said Rich Nelson, director of research at Allendale Inc.
Corn for March delivery reached a 17-month high of $2.8625 a bushel at the Board of Trade Tuesday morning before finishing 4.25 cents lower for the day, at $2.80 per bushel.
Supplies of corn, the largest U.S. crop, will fall to 901 million bushels before the next harvest, down from the 981 million forecast a month ago, the Agriculture Department reported. That shortfall is likely to prompt Midwest producers to plant more acreage in corn this spring, analysts believe.
Rising exports have contributed to a nearly 30 percent rally in corn prices since September, as the USDA raised its estimates for foreign corn sales by 25 million bushels.
“China is retreating from the export market, and we’re getting that business,” said Darrel Good, extension economist at the University of Illinois.
European Union exports also are flagging after a poor harvest this fall, and a weaker U.S. dollar is encouraging foreign buying as well.
At the same time, ethanol production is expanding as new capacity comes on line for the gasoline additive distilled from corn.
“Ethanol is really coming on,” said Good. “We’re building more plants by the day.”
Soybean prices also have rallied sharply in recent months amid surging demand and tight supplies. At the Board of Trade Tuesday, March soybeans touched some of their highest prices since 1997 before falling back 12.75 cents, to $8.3475 per bushel.
The Agriculture Department left unchanged its estimate for the soybean surplus at 125 million bushels, the lowest since 1977.
Soybean exports had been strong up until the past month, said Nelson.
Now, competition from South America is set to limit demand for the U.S. crop. The USDA projected Brazil’s soybean harvest in coming weeks at a record 61 million tons, up 1 million tons from its estimate last month.
The Agriculture Department also cited slower export demand in Southeast Asia after an outbreak of avian flu resulted in the destruction of more than 100 million chickens, reducing the need for feed.
In the U.S., the discovery of a second Delaware farm with avian flu sent a chill through commodity markets on edge after a separate flock tested positive for the disease last week.
Unlike the virulent strain that has swept through Asia, the Delaware virus appears to be less contagious, posing no danger to humans.
Even so, some major importers of U.S. poultry have slapped on trading restrictions.
Russia has banned chicken imports from Delaware but still buys from other states. Japan, South Korea, Mexico and, most recently, China have banned all U.S. poultry imports.
Although the bans may be short-lived, traders were conscious of how the first documented case of mad cow disease in the U.S. on Dec. 23 prompted import bans for American beef that remain in place.
Despite all the wild cards, many producers are crossing their fingers and hoping demand will keep pushing prices higher.
As Wood, the elevator manager, put it, “When everybody’s talking about corn going to three bucks, and beans going to nine bucks, farmers don’t sell.”
Even those who had a rough time last year are hoping for the best.
Earl Williams Jr. said he experienced some of the least favorable weather in Illinois at his farm outside Rockford in Cherry Valley.
Williams had respectable corn yields but not the bumper crop other Illinois farmers hauled in.
And an August drought left him nearly bereft of beans, he said, an unfortunate irony for a veteran producer who serves as president of the Illinois Soybean Association.
Still, Edwards has some corn and beans sitting in his bins that he hasn’t sold, and he’s waiting for the right moment in a tricky market, he said.
“I can’t think of times when there’s been so many questions,” he said. “I guess I should be optimistic.”
