There was huge divergence in grain prices over the past week, with corn being the weakest link. This is because corn demand became questionable due to it’s tie to the collapsing energy prices. Almost 40 percent of US corn goes to make ethanol.

Ethanol prices are trading under $.90/gallon, the lowest ever. Suddenly it is not an economical additive to gasoline, with lowest gas prices in 21 years. Production plants are shutting down to stop the bleeding. Corn basis has also dropped sharply.

Meanwhile, soybeans and wheat had strong gains for the week. Seasonally, grains rally in March or April almost 7 years out of 10. Also helping these markets was rumors of better exports, especially to China. South America is drying out, so crop estimates there are declining.

Soybean meal was the leader, rising $38.00/ton in the past week. That’s a 12.7 percent gain. Argentina, the world’s largest exporter, is in lockdown due to coronavirus, so is exporting less. Less DDG’s will be produced as ethanol plants shut down.

The soybean/corn ratio has obviously made a major adjustment with the relative moves this week. Because we are getting to the spring planting season in North America, it will likely mean more soybean and less corn acres.

In Ontario, the ratio favors soybean acres even more, as soybeans react to the weaker Canadian dollar much more than corn does. The current ratio delivered to Hensall elevators for new crop is nearly 2.6 to 1, whereas the Chicago futures ratio is only 2.4 to 1.

Most Hensall Identity Preserved (IP) soybeans carry a $3.25/bushel premium. Adding that to the harvest price puts the ratio to 3.3 to 1, and flat prices over $15.00 per bushel. That compares very favorably to our current harvest corn bid of $4.56/bushel.

Grain markets are more volatile, but nothing like the action in stock, bond, energy and metal markets. COVID-19 has drastically changed markets and the world. With volatility comes opportunity.

While the current situation is scary, we will come out of it. Perhaps it can be viewed as a necessary pause in our relentless, more hectic pace, and will give us time to be more reflective and think more about the most important things in our lives.

Frank Backx