It’s looking like today’s political and grain market pileups will be bigger and messier than first thought.
Here’s how New York Republican Representative Mike Lawler described his colleagues’ never-to-pass federal budget demands to CNN Sept. 19: “This is not conservative republicanism. This is stupidity.”
There’s little wonder that Congress has spent most of 2023 shooting its toes off instead of completing a responsible 2023-24 budget or passing the Farm Bill.
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Commodity markets, however, wait for no one and, like American politics, grain futures have been slipping and slouching since early summer. In fact, on Sept. 19, December corn futures sniffed contact lows near US$4.70 per bushel, a solid $1.50 below contract highs just three months ago.
The U.S. Department of Agriculture’s Sept. 12 World Agricultural Supply and Demand Estimates contained little news to kick prices higher, according to the experts at farmdocDAILY.com.
Indeed, if anything, the 2023-24 U.S. corn stocks-to-use ratio, sitting at about 15 per cent, “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.
The 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 contracts range around $13.20 per bushel, or about midway between contract highs and contract lows.
The USDA cautions, however, that 2023-24 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 per cent of all Midwestern grain exports. Lighter barges mean heftier barge rates. Current prices remain below last year’s record, 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. Hard Red Winter (HRW) exports are forecast down 10 million bushels this month” to constitute “the lowest since records started in 1973/74.”
Current total HRW exports, it relates, are down a staggering 21 per cent from the same time in 2022.
“But what about threatened Ukraine wheat exports?”
That’s 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.”
And, again, federal crop insurance will likely be a farm income booster in the U.S.
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 U.S. farm income last year.
Maybe that’s something Congress could look into – when it gets done with stupid, that is.
