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Weather, Stock Market, Worldwide Economics Impacting Corn and Soybean Markets

Gil Gullickson 06/24/2011 @ 1:21pm Crops Technology Editor for Successful Farming magazine/Agriculture.com

“How many of you have torn up your marketing plan this year?” asked Jim Jensen, Iowa State University (ISU) farm management specialist, to farmers in mid-June.

Like other farmers, those who attended the ISU Southeast Iowa Research Farm near Crawfordsville have eyed this year’s volatile markets and are wondering what to do. 

Commodity markets, particularly corn, have strongly rallied over the past year. So what should you do now?

“Weather is a big factor,” says Jensen. “This year, prices were up (during winter and spring), pushing farmers to plant more corn. That hasn’t happened, due to the weather situation.”

This spring’s prolific precipitation prompted USDA to lower projected 2011 corn harvested acres by 1.9 million acres in its June 9 WASDE report. With projected yields of 158.7 bushels per acre, USDA lowered U.S. corn production to 13.2 billion bushels, down 305 million bushels from earlier projections.

Projected U.S. corn ending stocks for 2011-2012 have been reduced to an estimated 695 million bushels. The ending stocks-to-use of 5.2% would be the second tightest in history, approaching the 5% in 1995-1996 marketing year.

USDA’s projected ending stocks situation is making for a rosy price scenario.

For the 2010-2011 marketing year ending August 31, USDA projects a midpoint $5.35 per bushel average price. For 2011-2012, USDA is increasing its projection to a midpoint of $6.50 per bushel price.

So what could go wrong?

* A sinking stock market. The dollar tends to rise when the stock market decreases. Since a rising dollar makes grain more expensive to foreign buyers, it curbs exports, notes Jensen. That can curb U.S. grain and oilseed prices.

* Bad worldwide economic news. “It wouldn’t take too much bad news on the world front to pull us (the U.S. economy) down,” says Jensen. That in turn could also plunge corn and soybean prices.

* Trouble in China. “China has a lot of control on our market, being such a big buyer,” he says.

That can be good. China is a huge soybean customer of the United States.

It also can have a bad side. “In world markets, when one country is such a large part, it’s sort of like dealing with Wal-Mart,” he says. Concerns like inflation can cause such countries to curb grain and oilseed purchases, negatively impacting U.S. farmers, he notes.

 

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Weather Trumps Demand