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Demand to outstrip grain supply, traders say

03/10/2011 @ 11:16am

Though the USDA released negative numbers Thursday for the grain and soybean markets, sparking a fourth consecutive lower opening, a long-term trend of increasing world consumption provides favorable support for farm markets, analysts say.

In a CME Group press briefing, instead of focusing on a current 'breaking' pattern for the grain and soybean markets, the panel addressed the increasing food demand of the world.
In fact, Scott Shellady, XFA currency and grain trader, says that using a 2% growth rate, the world's population double in about 35 years. "Further, of all the people ever born in this world, 15% of them are alive today. That is incredibly significant. And as that number rises, it's hard not to be bullish and not buy this market. It's shaping up to be a demand that we could have a hard time supplying."

Because of increased demand, Shellady sees huge market volatility for the next five years.


Going forward, farmers are being urged to utilize all marketing tools at their disposal to battle volatility while solidifying maximum profits. Two of those marketing tools include implementing 'futures and options' positions into their portfolio. Yes, there is more risk here vs. the cash market. However, using the options tool can serve as a less risky choice to protect downside price levels yet leaving the upside open.
Going Forward
Terry Roggensack, The High Tower Report co-owner, says going forward the government report numbers are not the only market factors to watch.


The marketwatchers see great opportunity for farmers pricing their crops with options contracts, as volatility rules the day.

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Scott Shellady: Options 101