By Chad Hobbs
Eight years ago farmers experienced record setting grain prices, but like an overinflated balloon, it didn’t take long for the $8 plus bushel corn and $17.5 soybean prices to burst the market bubble.
Since that 2012 high water mark, farmers have watched the market crash on them, at first slowly then at a breakneck speed that has left many of them struggling to break even for years now. Foreclosures, auctions, depression, and suicide have been words plaguing the industry, from sea to shining sea, for too long now.
2020 has been a rough year for all Americans, but an almost ideal growing season along with a rallying grain market has many farmers in this part of the country more optimistic than they have been for some time, as they march through this year’s harvest season. Many local farmers are reporting bumper crops, as they progress through their fields.
From August 10 to the middle of September soybean contracts jumped $1.76 nationally for November delivery contracts. Though neither market is close to where it needs to be, it is at least headed in the right direction. The last year farmers had an average close price for the year above $10 for soybeans was 2014. The last year the average close price for corn was over $4 was also in 2014. Monday, November delivery beans were hovering around $10.41 per bushel and corn was at $3.94. The question is will prices continue this upward trend into the late winter/early spring of next year, when farmers traditionally find some of their best prices, if they have the capability to hold some supply that long.
The derecho that hit Iowa with 100 plus mph winds earlier this year may be helping prices some with several million acres of corn and soybeans completely flattened, but much of the upward swing in the market appears to be driven by aggressive purchases by China recently.
According to the USDA, sales of corn to China soared 513% in August compared to June. Soybean sales also surged with China increasing purchases 432% in that same time period. In fact, the USDA claims that sales of soybeans to the Chinese could set a record of 40 million tons in 2020, which is 10 percent higher than their previous record purchase in 2016.
Three typhoons flattened crops in the main northeastern corn growing region of China in late August. According to the South China Morning Post, this not only decimated their crop but also pushed corn prices to their highest level in five years in that country in early September.
Adding to this, the government had advocated for the past two years for their farmers to grow more soybeans and less corn. From 2015 to 2019, corn acres decreased by 7.4 million planted acres.
Chinese swine herds are reported to be rebounding from an outbreak of African swine fever last year, calling for an increased demand for corn to feed the hogs. These factors combined with the requirements of phase 1 of President Trump’s trade deal with China have been the main driving forces for the jump in grain prices. China is projected to have a grain deficit in 2021.
The EPA recently rejected waivers that were allowing small gas refineries to forgo ethanol blending into their gasoline which should also increase ethanol demand, as the country begins to open up more and demand more fuel.
It is yet to be seen, however, if this will all lead to prices continuing to rally into 2021 and beyond.