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Old, high grain prices near

Ray Grabanski 12/23/2010 @ 9:51am President, Progressive Ag www.progressiveag.com

Grains are all approaching their recent highs. Wheat, corn, and soybeans are within striking distance of the two-year highs made for all three crops.  This indeed is going to be a very Merry Christmas for most farmers, as prices have not sat at these price levels much during the history of grain trading (perhaps a few months).  

Grains have some great examples in the commodities of just how volatile things can be, as sugar, cotton, and coffee all are giving the grains a sign of the type of strength that commodities can get when people are short supplies.  

Coffee prices ran to new highs today, running above their recent highs and now at all-time highs for coffee prices, well above 2008 price levels.

Cotton has rallied to new highs as well, impressive after a huge price dip of about 20% from the highs made in November.  Since then, cotton prices have rallied back to new highs, above the November highs, and the volatility seems to be accelerating (limit up Tuesday and limit down Wednesdday).  These are indeed interesting times, especially when one realizes that cotton competes with corn, soybeans, and wheat acreage in the cotton belt.  Surely there will be more cotton acres in 2011, and that will come at the expense of the other 3 major crops when they have no room to give up acreage.  That makes for some interesting times as we go into spring - with the battle for acreage heating up between the big 4 crops. 

Sugar prices retreated sharply from earlier highs last winter, then rallied to new highs this November only to break sharply in a two day period (about 23%), only to rally back to the old highs this week of November.  Sugar producers are smiling, and looking at perhaps their biggest year ever for gross revenue.  The volatility in the sugar market reminds us of times of old, as sugar has now rallied well above their 2008 highs (joining cotton, coffee, and gold here).  

The rallies to new highs or back to old highs in the soft markets seems to be helping grains propel back to their old highs as well, as the feeding frenzy on commodities is not yet over by speculative funds.  It is indeed exciting times for producers of commodities, and there will be many Merry Christmases and Happy New Year's if prices stay at these levels long.  

Indeed, one has to wonder whether grains will stop at these recent highs, with the kind of strength there is in other markets.  Things are all coming to a head here at Christmas, a time when typically traders are leaving behind their worries and trades, and looking forward to spending some time with families and friends.  But alas, they'll probably want to keep one eye on the computer screen, checking prices frequently around the holidays to see what the markets have in store for us in the coming weeks.

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