Grains slowly break out
Grains are slowly breaking out of their recent price ranges, with soybeans and corn running to new recent highs lately on continued dry weather in South America. Argentina, especially, is experiencing dry weather in some main growing areas, helping many to trim their crop production estimates for both corn and soybeans. Dry weather during this critical time period certainly can trim production outlooks.
Not only are there problems in the SAM production region, but also many other commodities continue to hold their strong gains. Cotton, Sugar, and Coffee all have had strong runs higher recently, with all 3 running to new recent highs and showing the same kind of strength as grains.
While grains have not exceeded their 2008 highs, the soft commodities mentioned above have run to new all-time highs recently. And they are not showing any signs of weakness yet, in spite of the CRB index at or near its 2008 highs as well. Perhaps the story of 2010 is in the soft commodities, with all-time highs formed for cotton and coffee, and sugar exceeding its 2008 highs.
The softs have finally caught up with many of the other commodities, with energy and grains having strong bull runs in 2008. But the softs had their run in 2010, with an exceptional pricing year forthe soft markets.
Now, we go into 2011 with cotton competing for acres with corn, soybeans, and wheat. With the huge spike in cotton prices in 2010, it's likely cotton will attract acres back from wheat, corn, and soybeans that they took away due to the strong run in grains in 2008.
So commodities are continuing their strong runs in 2010, making a very Happy New Year for many farmers across the globe, as they enjoy their best prices ever for commodities, in general. While the possibility of forming the highs for the year (and perhaps decade) was there for this run, the fact that soybean and corn prices have broken above their two-year highs is indeed a very positive sign.
This is indicating that the run higher won't end at the 2010 highs, and is going to take a run at the 2008 highs as well. That's quite a statement, as 2008 highs were over $16 for soybeans and near $8 for corn.
In the case of corn, we only spent six weeks above $6 futures in 2008. But, in those six weeks, we ran prices all the way to $8, a 33% price rise from $6. We basically spent only three weeks running from $6 to $8, and then it took less than three weeks for prices to break back below $6.