Home » Newsletter
Low Inventory, Higher Demand Create Volatile Grain Prices
By Richard J. Grever, AFM, CCA
Having a grain marketing plan is important, especially with the current market volatility, which is expected to continue. This past spring we had the highest prices for corn since 1996 and for soybeans since 1988.
Higher prices are a result of the disappointing U.S. soybean yields in 2003, lower than anticipated South American production, and strong demand for most commodities. World coarse grain supplies are at the lowest level in 30 years.
Increased usage is due to strong world demand for corn and soybeans and continued increases in the production and demand of ethanol and soy diesel. The weaker U.S. dollar also contributes to strong exports.
With increased usage, the USDA is projecting year-end carry over supplies at historically low levels. Projected carry over will fall to approximately 125 million bushels of soybeans and 800 million bushels of corn.
The USDA is estimating the 2004 plantings at 79 to 80 million acres of corn and 75 million acres of soybeans. The market has anticipated an increase in corn acres for 2004 due to the high corn yields and the low soybean yields in 2003.
Over the next several weeks, the market will watch weather and crop growing conditions closely. Early planting provides the potential for a higher corn yield; however, a record yield of approximately 144 bushels per acre is necessary to meet USDA’s projected demand for 2004/2005 of approximately 10.5 billion bushels.
For soybeans, the carry over situation and need for a record U.S. crop is not as critical. The potential for record soybean planted acres in 2004 provides a cushion should there be production problems.
We are now in the time period when weather greatly influences grain prices. Low old crop stocks and weather uncertainty will bring continued price volatility through the 2004 crop year. Grain prices are considerably higher than the past several years, and at extremely profitable levels. A marketing plan with price objectives established ahead of time helps to take the emotion out of marketing grain and could make it easier to handle what is anticipated to be a wild time this summer.
