Happy New Year! That’s definitely the way things are starting out this year with markets continuing their rally from late 2020. Overnight corn was up 6 while soybeans were up 28.
The Chinese currency in relationship to the US Dollar is the news this morning as these currencies are headed in the opposite direction. The weaker US Dollar and much stronger Chinese Yuan are making the Chinese buying power much stronger. The Yuan is managed by the communist party and they appear to be making a statement here as they are looking to import grains and meats from the world suppliers.
I do not see this recent rally as a positive for US producers long term because it is not sustainable. Higher prices result in rationed demand and this has already begun. Last weeks ethanol production and stocks report showed production down 42,000 bpd from the previous week and 132,000 bpd from 2019. We also saw stocks increase 14 million gallons from the previous week and 104 million gallons from the same time last year.
Producers should be actively making sales of old and new crop corn in the coming week before we get to the USDA report next week. This recent rally in the CBOT has and will continue to deteriorate basis levels across the country. No one knows where the end is, but my opinion is that we are very close to the top and could see a major setback in the markets. “High prices cure high prices”!
Have a Safe Day!