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Agriculture.com Staff 04/24/2009 @ 1:23pm

The news out of Washington and from Wall Street is plentiful, but it has been inconsistent and confusing. In contrast, the economic news out of China has been hard to get, but it is encouraging for farmers.

I study U.S. and global economic data by looking at charts and spreadsheets on each nation's GDP (gross domestic product). I look at the major stock markets throughout the world and study charts on what the U.S. and world stock markets are doing. It's a whirlwind of data that is constantly changing.

After one recent frustrating afternoon, I shut off my computer and grabbed a pen and pad and tried to make a list of the most important numbers I track. It took six drafts and ended up being more than one list. I call these lists my scorecards. I use my scorecards to track the key data and events (the metrics) that I evaluate each month when I'm looking at the markets. Here are some highlights from three of my market scorecards.

The U.S. economy has slowed down, and the best forward-looking benchmark I watch is the U.S. stock market. The month-to-month decline in U.S. stock prices suggests that the U.S. economy is not out of the woods yet. The stimulus plan will eventually help, but we are in a lag period. The program has begun, but the money isn't out into the consumers' pockets yet. The number I track here is the Dow Jones Index.

Attempting to track the global economy is a challenge. For farmers, the one key benchmark to measure demand is to watch what is going on in China. The recent up-tick in the GDP in China is a very hopeful sign. What I track is China GDP.

The U.S. dollar is also important to watch, as it has a huge impact on how competitive we are in the global grain markets.

Recently, the U.S. dollar has been rallying, as world investors seek to reduce risk and buy safe, lower yielding investments. This flight to safety has global buyers bidding up the price of U.S. Treasuries. And at the same time, they are bidding up the value of the U.S. dollar. In this unusual market environment, when the U.S. economy finally turns around and starts to improve, look for the U.S. dollar to weaken. What I track is the U.S. Dollar Index.

Another important benchmark is energy prices. Crude oil prices have a huge impact on corn and all agricultural commodity prices. Since late June of 2008, the weakness in crude has taken corn, wheat, and oilseed prices lower. A reversal of the bear market trend in the crude oil market will be a positive factor for farm prices. What I watch is the price per barrel of crude oil.

One key number on my Global scorecard is the perceived international price of grain. I get this number by multiplying the price of nearby CBOT futures by the dollar index. This perceived price puts the price of U.S. grain into perspective. If the U.S. dollar is weak, then U.S. grain is a bargain for non-U.S. buyers. In other words, it might seem expensive to us, but to a foreigner with strong currency, it's still a good deal. Don't forget that we are not our only customers.

The news out of Washington and from Wall Street is plentiful, but it has been inconsistent and confusing. In contrast, the economic news out of China has been hard to get, but it is encouraging for farmers.

Another key number I track is the monthly Commodity Research Bureau (CRB) Index. The chart of this Index, which I refer to as the Dow Jones of Agriculture, starting going up in early 2002, topped out in June 2008, and is now bottoming out.

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