Grain markets are lacking enthusiasm now that most harvest numbers are realized across the U.S. (Photo courtesy National Corn Growers Association)

By Carrie Muehling

NORMAL – While last week's USDA reports showed fairly tight supplies for corn and soybeans, grain markets are also responding to demand rationing as some end users are looking to alternative sources for inputs.

Suggestions are that demand will surface on price breaks moving forward.  The world supply/demand balance sheet is tighter yet for corn and also for soybeans, although those numbers are a little bigger.

“When you analyze it and break it down going into the winter, we’re relatively tight because Brazil and Argentina are sold out.  Our beans are going to be the only real relative supply of availability on the world market, so therefore we look for the bean market to sort of hang in there until we get into this winter and see what the South American crop shows,” said Curt Kimmel, commodity broker with Bates Commodities in Normal.

The main concern is downside risk from the prospect of commodity fund liquidation.  Indications of drought last spring and early summer brought speculators into the grain markets.  Now that the growing season has come to an end and production numbers have been realized, there is little enthusiasm in the market.

“Our fear is the commodity funds are looking to put their money to work somewhere else.  The old saying is you’ve got to have the roar of the market to keep going higher, whereas with the squeak of the mouse, the market goes down,” said Kimmel.

Headline news items just aren’t there yet, but could materialize depending on what happens with South American weather.  Demand continues to be a concern especially for corn, as $8 seems to be the benchmark for American end users.  Kimmel gave the examples of a livestock feeder in the Carolinas last week looking to import over 750,000 tons of corn out of Brazil and a big sell off last Friday after the announcement of an American end user importing up to 600,000 tons of Argentine corn, suggesting those users are looking for alternative sources at these price levels.

Higher grain prices have been offset for higher overall values for livestock.  Longer term, the cattle complex is bullish and herds are rebuilding.  Hogs are more sensitive to the price of corn, and higher prices in the spring could encourage another round of liquidation in that sector.

Kimmel said it appears the economy is hanging in there, led by the agriculture industry.

“The farm sector is doing quite well.  We’re hearing some farm ground going as high as over $14,000 an acre, which indicates some optimism out there,” said Kimmel.

Carrie Muehling can be reached at carrie@wjbc.com.