February 26, 2024

Farm & Food File: The pileups start to pile up

Evidence continues to pile up that today’s political and grain market pileups will be bigger and messier than first thought.

Right now, it’s political carnage that’s making headlines. I’m old enough to remember when Congress’s biggest worry was foreign bombs, not bombast, and when congressional leaders muzzled their party’s empty-headed lip flappers.

Not today, though.

Here’s how New York GOP Rep. Mike Lawler described his colleagues’ never-to-pass federal budget demands to CNN Sept. 19: “This is not conservative Republicanism. This is stupidity.”

To such brief eloquence I can only add: Amen, brother.

Little wonder Congress has spent most of 2023 shooting its toes off instead of completing a responsible 2023-2024 budget, passing a soon-to-expire farm bill, or allowing routine up-or-down votes to give our nation’s armed forces the leaders we have spent a generation — and a fortune — educating and training.

So, until simple common sense prevails over plain old stupid, we wait. Meanwhile, our enemies smile and our allies shake their heads.

Commodity markets, however, wait for no one and, like our politics, grain futures have been slipping, sliding and slouching since early summer.

In fact, on Sept. 19, December corn futures sniffed contact lows near $4.70 per bushel, a solid $1.50 below contract highs just three months ago.

The U.S. Department of Agriculture’s Sept. 12 WASDE, or World Agricultural Supply and Demand Estimates, contained little news to kick prices higher, say the experts at farmdocDAILY.com.

Indeed, if anything the “2023-2024 … U.S. corn stocks-to-use ratio,” at “about 15%,” implies “corn price levels below $4 per bushel.”

But, say the seers, this year’s “elevated” interest and inflation rates have pushed the “current market … (to) a roughly trend-level production forecast … of about $4.80 per bushel,” or near where prices are now.

USDA agrees; it forecasts a $4.90 per bushel season average price. November soybean futures fare a bit better, but like corn futures, most contracts remain $1.50 off their highs.

Mid-September prices for the nearby November contract are in the $13.20 per bushel area, or about midway between contract highs and contract lows.

USDA cautions, however, that 2023-2024 soybean prices will likely average $12.90 per bushel, or about $1 per bushel lower than a year ago.

Both price forecasts, though, face the added pressure of dropping water levels in the Mississippi River, the main route for an estimated 60% of all Midwestern grain exports. Lighter barges mean heftier barge rates.

Current prices remain below last year’s record prices, but continued dryness will slow river traffic and clip local cash bids.

Hard red winter wheat futures, like corn futures, have slumped badly since June highs and now stand just 20 cents or so above their contact low of $7.15.

Worse, most new wheat news is bad news. In its most recent Wheat Outlook report, USDA noted that “U.S. HRW exports are forecast down 10 million bushels this month” to constitute “the lowest since records started in 1973-1974.”

Current total HRW exports, it relates, are down a staggering “21% from the same point last year.”

“But what about threatened Ukraine wheat exports?” comes the cry from hard red growers and hard-nosed futures traders.

The short explanation, courtesy of Reuters, is that “cheap Russian wheat … has dominated the market, pushing down prices despite expectations that global exportable stocks will approach historic lows by mid-2024.”

Today’s low grain prices and forecasts for stagnant or even lower prices suggest federal crop insurance will again be an income booster in the new marketing year. That is especially likely in areas like the upper Midwest where drought clipped yields.

That likelihood again showcases crop insurance’s growing role in farm income. According to a recent analysis by the Environmental Working Group, “indemnities paid to farmers for reductions in crop yield or revenue reached a record $19.3 billion” in 2022. And that’s despite the record $183 billion net farm income last year.

Maybe that’s something Congress could look into — when it gets done with stupid, that is.

Alan Guebert

Alan Guebert

Farm & Food File is published weekly through the U.S. and Canada. Source material and contact information are posted at www.farmandfoodfile.com.