Grain market guru says hold on for wild ride in grain markets

LONDON, Ohio — Expect the bumpy ride in the grain markets to continue through the end of the year.

That was the consensus as Dr. Matt Roberts talked about the grain markets at the Farm Science Review.

The ag economist emphasized that anyone involved in the commodity market has to keep his attention on just about everything.

“There is nothing you can ignore. Everything that can affect the grains markets is,” said Roberts.

Factors such as the state of the harvest, the late planting, the conditions at pollination and the weather all affect whether the markets go up or down.

And another major factor influencing the market is comments and actions by Federal Reserve Chairman Ben Bernanke.

Roberts gave this example: On Sept. 21, Bernanke said there were significant downside risks to the U.S. economy. His comments influenced the market enough to cause prices to fall overnight and into the next day. Corn fell 20 cents overnight and soybeans fell 30 cents.

World market

Roberts said it is estimated that there is a one in three, or one in two chance that the United States could slip into another recession because of world events, and said the Greek debt crisis is also a contributing factor to the wild ride in the grain markets.

Germany and the European banks are some of the largest holders of the Greek debt and if they are not able to balance their books, then the residents in those countries could be affected, which would mean cutbacks in budgets. Basically, Roberts explained, this is interpreted as not as many livestock to feed, so less grain is needed.

And one other area of the world to keep an eye on is China. Roberts said if the European Union and the United States would slip into a recession it may mean that China may need less grain because its economy may not grow as quickly as it is now. This may mean fewer Chinese consumers will be able to afford the quality of food they now have — which would mean less grain for livestock and possibly less soybeans for the rest of their diet.

In short, Roberts said if the global economy slips back into a recession then the demand for grain could fall and so could the price.

However, Roberts said there is some positive news people can take from the markets — it is obvious that when there are economic doubts worldwide, people still lean toward America.

“When things go sideways in the world, people still put their trust into the U.S.A.,” said Roberts.

Hold on

The grain market guru, as Moderator Stan Ernst called Roberts during the seminar, said anyone watching the market can expect a tremendous amount of volatility in the next few months, maybe even the next couple of years.

High still to come

One question raised by the “Question the Authorities” audience was what to do if you have unsold corn from the harvest of 2011.

Roberts said he expects there to be at least one more opportunity to hit a high price. He expects corn to top $6.40 a bushel again and maybe even $7 some time in December. However it will happen before Jan. 15.

“Don’t look to store it. This is not going to be the case this year,” said Roberts.

He said there will be two events that will trigger higher grain prices.

One will be in October when the FSA releases their acreage reports and the resulting USDA NASS reporting, and then again around Thanksgiving when the government begins to bid for between 93- 96- million acres of corn.

“Don’t get greedy on this. Remember bulls get fed and hogs get slaughtered,” said Roberts.