By Carroll Smith
Melvin Brees, the market/policy Extension associate, FAPRI, University of Missouri, writes an insightful grain column each month titled “Decisive Marketing.” Highlights from this column are typically featured each time we publish Soybean South and Corn South.
In order to pack in as much useful Southern soybean information as possible early in the growing season, I would like to share my page with Brees this month so that our readers will have the opportunity to take in his latest remarks about what’s happening in the soybean marketing arena.
The following is an excerpt from “Decisive Marketing.” To read Brees’ column in its entirety, please go online at www.agebb.missouri.edu.
“USDA’s April 8, 2011, World Agricultural Supply and Demand Estimates (WASDE) report made no changes to expected old crop corn and soybean 2010-11 ending stocks. World coarse grain use is expected to exceed production, and global soybean use continues to grow.
“Soybean acreage intentions point to an 800,000 reduction in 2011 plantings from last year. With already tight supplies, reductions in use and trendline yields will be necessary just to maintain minimum carryover levels.
“Other fundamental market factors aside, weather alone will be enough to keep the markets volatile and uncertain for the next few months.
“Economic conditions (both domestically and abroad) and currency values could impact demand. Higher energy prices have tended to support grain prices, but they add to economic risk and other potential negative impacts on demand.
“Investors and fund traders continue to hold large positions in commodities. If they add to these positions, it will be positive. However, if these traders begin to liquidate, it could be very negative for corn and soybean prices. Changing government policies and budget cuts could result in unexpected market changes. Political unrest in other parts of the world, especially the Middle East, adds to market risk. Unforeseen events or disasters, such as the Japanese earthquake, can blindside the markets and produce sharp price changes. Any of these or a variety of other factors could provide bullish or bearish ‘shocks’ to the market in the weeks or months ahead.
“In spite of the uncertainty, market advice for dealing with volatile markets has not really changed in recent weeks. Current new crop prices are above most current projections for average 2011-12 corn and soybean prices. Generally, these prices also offer very good profits if production meets expectations. Prices are favorable, and trying to hit a market high is not a reasonable goal. It probably becomes less a question of whether sales should be made and more a question of when and how to add to sales.
“With global markets, weather or events anywhere in the world can cause prices to ‘turn on a dime’ and change market outlook. Many factors have and will likely continue to contribute to market uncertainty, risk and volatility.
“Just as in the past year, these wide price swings can offer opportunities. But, they also significantly increase risk. That has been the situation for some time, and it looks like more of the same ahead.”