Around the Markets

Organic Corn trading activity is stable with bids seen near $7.25 and offers for delivery in November and December, at $7.75. Market participants expect prices to remain near current levels, as a stronger dollar makes imports of organic corn less expensive.  The variable component is the new President-Elect, who stirred the pot during the campaign, suggesting that he would propose a 45% tariff on Chinese goods, and a 35% on cars.  If import prices increase due to tariffs, domestic prices could begin to rise. The carry for corn remains near $0.25 per quarter. Non-gmo yellow #2 CIF remained steady at $0.10 premium over conventional for new crop delivery, as the robust yield weighs on premiums.

To benefit from the premium attached to non-gmo corn, farmers need to grow their crops near their buyers to avoid the erosion of profits due to transportation cost. While the harvest for conventional corn is nearly complete at approximately 95%, according to NASS, the organic harvest is just starting to accelerate.

Corn board futures prices have nearly eliminated all the gains seen in October. Per the most recent commitment of trader’s report released for the date November 8, 2016, managed money significantly reduced short positions in futures and options while adding to long positions in futures and options.  Managed money, that is short futures and options, outnumber managed money that is long by approximately, 28K contracts down from 131K contracts, 4-weeks ago.

Mid-west organic soy bean trading activity is moderate, and the quality of the beans are exceptional.  Prices remain stable for November and December delivery, as buyers and sellers continue to wait for someone to flinch.  Storage space will soon become an issue for farmers, which could further weigh on prices. Prices have drifted to the $17.10-17.70 range, with a carry for the first quarter of approximately 25 cents per bushel. Non-GMO soybean CIF for November and December deliver are trading $0.15 –  $0.35 above cash prices for new crop. Approximately 97% of conventional soybeans have been harvested, per the NASS.

Organic soybeans and corn only make up 1% of the total harvested soybeans and corn produced in the United States.  Demand should continue to rise in 2017, with most of the increase coming from organic feed as organic milk, organic chicken, and organic eggs gain further popularity. The Agricultural Marketing Service recently reported that total organic milk sales were 218 million pounds in August, a 13% increase year over year, while organic whole milk was up 28% year over year in August (USDA).

Wheat prices are on the ropes revisiting the recent lows made in September.  Momentum has turned negative as the MACD (moving average convergence divergence) index recently generated a crossover sell signal.