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3 regions seen affecting U.S. markets

Jeff Caldwell 10/12/2011 @ 1:27pm Agricultural content creator and marketer.

Now that USDA's spoken, analysts and traders say the new trading range for corn is $5.50 to $7.00; which end of that price range, however, depends on a few factors moving ahead, both at home and abroad.

On Wednesday, USDA released neutral to friendly crop production and world supply/demand, numbers that essentially put a $5.50/bushel price floor under the corn market, U.S. Commodities grain market analyst and trader Don Roose says.

On the other side of the spectrum, though Roose says there could be some price resistance around the $6.50/bushel level, Jerry Gidel of North American Risk Management Services in Chicago says $7 corn prices are likely, mostly because of ongoing demand, both in the domestic livestock sector and growing overseas demand.

On that latter point, there are 3 areas to watch moving forward. First, analysts agree tightened U.S. soybean stocks make it important for South America to raise a good bean crop.

"Ending stocks on beans are going to remain fairly tight," Roose says. "We're going to watch the weather very closely in South America."

But, it's not just the weather there that could cause the soybean supply chain to tighten. There's not a ton of wiggle room in corn supplies either, and Gidel says he won't be surprised to see farmers in Brazil and Argentina start to take more acres out of soybeans and plant more corn. Whether it's Mother Nature or acreage decisions, either could have a dramatic effect on soybean prices moving into next year. And that could spark a new fight in the battle for acres in both South and North America.

"We do need to have a slight increase in soybean acres. That could depend a lot on how South American yields come through this winter," Gidel says. "Soybeans are at their low end of price relationship with corn. If anything goes wrong with the crop this year, we could have an explosion of prices going into 2012.

"Maybe the acreage battle began today," he adds.

Russia's another key area to watch, at least in terms of its presence in the wheat market. This week, that nation's leaders started the process to impose export duties on wheat, a step they say is to help control inflation. If that happens, look for buyers around the world to turn to U.S. wheat, which itself could wind up in short supply again next year if growing conditions don't improve soon, says AgResource Company market analyst Bill Tierney.

"I think the market's going to have to wait until analysts become concerned with next year's crop," he says. "There are serious concerns with the crop in the Plains."

Finally, there's China, which has been virtually ever-present in the grain markets the last few months. Analysts agree that if that nation -- which again bought 1.5 million metric tons of U.S. corn Tuesday -- continues its pace of importing U.S. grain, it could further tighten supplies and drive prices higher.

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