"The average cash price of corn in
central Illinois has reached the lowest level since the 2000-01
marketing year, and cash soybean prices are the lowest since the
2001-02 marketing year," said Darrel Good.
Good's comments came as he reviewed
the current prices in the context of historical price trends and the
potential influence of upcoming USDA reports.
Historically, lows in cash corn
prices in Illinois (and presumably in other Corn Belt states) have
occurred either at the beginning or the end of the marketing year.
Over the past 31 years, the marketing-year low was established in
September or October 14 times and in July or August 14 times. Lows
came in November, January and February one time each.
"We have come to expect that lows in
the cash market come early in the marketing year in years of very
large crops, like 2004," said Good. "The harvest lows reflect low
futures prices and a weak basis. The data generally support this
belief, but there have been exceptions. New lows in some large crop
years have been established late in the marketing year when another
large crop was developing."
For the current marketing year, the
lowest overnight average cash corn bid reported in central Illinois
was $1.695, established on Nov. 4. That low compares to lows ranging
from $1.45 to $1.795 during the 1998-99 through 2001-02 marketing
"It now appears that for the current
year a seasonal low, or perhaps marketing-year low, will be
established around the USDA's November crop production report to be
released on Nov. 12," said Good. "A larger crop forecast would
likely push prices below the current low, while an unchanged to
smaller forecast would produce a small price increase.
"A combination of good demand and
concerns about the 2005 crop is expected to result in some
significant price recovery by the spring-summer of 2005. Of the past
15 years when a price low was reached in the fall, a marketing-year
high cash price was reached in December one time, April one time,
May one time, June four times, July five times, and August three
times. The high in those 15 years ranged from 44 1/2 cents to $2.525
above the fall low."
The seasonal pattern of cash price
highs and lows for soybeans over the past 31 years has been similar
to the pattern for corn. The marketing-year low cash price in
central Illinois was established in September, October or November
15 times and in July or August 12 times. The low occurred once each
in December, March, April and June.
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For the current marketing year, the
lowest cash price was $4.80, occurring on Oct. 13. The current cash
price is just marginally above that low. The low price to date
compares to lows ranging from $3.875 to $4.295 during the 1998-99
through 2001-02 marketing years.
"Given the size of this year's U.S.
crop and prospects for large increases in U.S. and world stocks,
there is less confidence that soybean prices have established a
seasonal or marketing-year low," said Good. "While the basis has
generally been weak, futures prices have been supported by a low
rate of soybean sales by producers and the need for processors to
refill the pipeline.
"That combination has resulted in
much of the carry being removed from the futures market and November
futures being premium to January futures at times. That price
structure is highly unusual with such a large crop and storage
The slow pace of soybean sales by
producers has been explained by the theory that producers anticipate
harvest-price lows and a post-harvest recovery. Sales are being
delayed in anticipation of established large loan deficiency
payments and then holding soybeans for a price recovery. Ironically,
the reluctance to sell has prevented prices from declining as much
as anticipated so that producers are still waiting for larger LDPs.
In addition to the pace of sales by
producers, soybean prices will be influenced by USDA's Nov. 12 crop
production report, the progress of the South American crop and the
pace of Chinese purchases of U.S. soybeans.
"A sharp break in prices in the next
few weeks would increase the confidence that a marketing-year low is
being established," said Good. "Like corn prices, early season lows
in soybean prices have typically been followed by spring-summer
highs. Of the 15 years with fall lows, the highest cash price
occurred in March one time, May three times, June four times, July
five times and August two times. The highs in those years ranged
from 93 1/2 cents to $5.13 above the lows.
"A failure of prices to establish
new lows soon would leave the door open for additional price
weakness later in the year on the basis of a large South American
[University of Illinois