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Is demand taking over?

Agriculture.com Staff 09/07/2007 @ 9:26am

With the two major private estimates of the corn and soybean crops released in recent days, the market has more supply information at least until the USDA reports next Wednesday. There's a strong feeling the corn crop will be larger than the August estimate, with a little more uncertainty about the soy crop.

The muted reaction to these private estimates suggests the market is in the process of shifting to being more concerned about demand. In fact, the world supply/demand tables may be the most important items the USDA will release (yes, more important than the size of the U.S. corn crop). With the myriad of crop problems around the world, the tables could look historically tight. The U.S. supply of wheat and feedgrains will be crucial to satisfying demand in the rest of the world.

The market has begun thinking about the shifts that will need to take place in coming months. First, wheat feed demand must be rationed, so there is adequate supply for the food category, where demand is very inelastic (not responsive to price changes). Europe will need feed, but only the non-GMO variety, meaning the U.S. won't sell them corn, but can sell them sorghum. Plus the U.S. can sell corn to other countries with no GMO restrictions. Plus, what will everyone plant?

The wheat market started this demand concern, even before harvest was over. Wheat demand has been phenomenal, as big buyers such as Egypt and India step up to secure their needs. This market is showing what can happen when price can not ration cash wheat demand fast enough. Once again, the weekly export sales report, due out tomorrow morning, is expected to show wheat sales around one million metric tons.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

With the two major private estimates of the corn and soybean crops released in recent days, the market has more supply information at least until the USDA reports next Wednesday. There's a strong feeling the corn crop will be larger than the August estimate, with a little more uncertainty about the soy crop.

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