Processors who resist the temptation to overproduce in response to favorable short-term commodity markets can set themselves up for longer-term successes.
We’re starting the new year off with a really favorable commodity environment for protein producers. The price of corn is hovering around the $4 mark and soybeans are hovering under the $10 mark. There’s no reason to believe we won’t have another great crop in 2016. No doubt a very attractive futures price will be available. If I were a producer, I would be tempted to lock in a percentage of my requirement at an attractive futures price for both corn and soybeans for my 2016 rations.
Crude oil prices are also extremely low. All my friends in the oil business tell me that more than 10 percent of their oil production has been going in a tank for the last year. Pretty soon, tank capacity will be maxed out and product will have to come to market. Unless an international incident occurs, this will guarantee inexpensive energy for at least the first six months of 2016. Low energy prices typically affect the price of corn, which will contribute to inexpensive corn for a significant period of time.