Price lid remains...for now
NORMAL – If this turns out to be a decent planting season and current events continue around the world, expect that to keep a lid on crop prices.
Curt Kimmel from Bates Commodities in Normal notes the trade is still looking at putting a crop in early with no real weather concerns. This all provides a negative atmosphere for prices.
“In order to get something weather-wise, I think it’s going to take June or July to flip this thing into a hot dry situation to get everyone excited,” Kimmel told The Central Illinois Farm Network Thursday afternoon.
This time period reminds Kimmel of the 1980s when we had plenty of supply around and record interest rates. We stayed low enough back then that demand was created and the drought of 1988 brought prices up.
“That’s what it is going to take here – some adverse weather to turn this thing in a hurry, otherwise we are probably going to continue to grind sideways waiting to see if this stimulus package helps take the edge off.”
The main concern now is overall demand prospects and trying to work with a surplus of energy around the world.
“We are seeing situations where ethanol plants, as everyone knows, are taking some down time with complete closures. There is a good chunk of them at 50 percent capacity.”
Kimmel is hopeful for the removal of the current stay-at-home order sometime in May in order to start seeing crude oil and gasoline futures recover. Losing more demand would impact old crop corn carryout. If farmers get a large amount of corn planted, we would have plenty of supply around to work with.
It has been one thing after another for livestock producers who Kimmel feels have taken a “beating.” Seeing the cattle on feed reports will be interesting as the feeders are trying to tweak the rations to slow down weight gains until some of the meat gets flowing.
“Placements in the feed lots is going to be kind of skinny through here,” Kimmel noted.
Plants will be brought back to operation but it will take some time and they are working on it as we speak. When looking at the price of meat coming into market, it is way below the cost of production.
“It’s going to be a challenge here to keep these livestock guys going,” admits Kimmel.
Bates Commodities can be reached in Normal at 1-800-779-1515.