2012 US commodity market outlook

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Please note that due to the publication schedule, this outlook of the commodity markets was written based on market intelligence from late-November, 2011. Efforts have been made to make this as up-to-date and informative as possible, but due to the constantly changing nature of the markets, certain information may be out of date.

demand driven corn market
The current corn market is struggling to find enough traction to stop the slide it’s been in since early September. As in most short crop years, the market did a nice job of pricing in the production problem before the combines actually got into the field. There will continue to be some nervousness in the market leading into the January final crop report over the actual yield.

But once that is behind us, it will be about demand. Have the prices done enough to reduce corn usage by the USDA’s 100 million bushel projection? Currently ethanol margins are very good, but how will they be affected if the 45 cents per gallon blender’s credit does not get renewed on January 1st?

A lot of the drive higher last winter and spring was the corn markets attempt to make sure enough corn acres were planted in the spring of 2011. With December 2012 corn futures trading above $6.00 from the middle of April 2011 to the middle of November 2011, I believe most of its work is done. The market will be very aware of any signs of surging demand or weather issues, but for the most part this does not look like last year’s corn market.

soybean markets dependent on south america
Soybeans’ biggest struggle this past fall has been a very slow export pace. Our current soybean export sales are 400 million bushels behind last year’s pace. But, with the USDA’s current projection for this year’s US bean export at 1.325 billion bushels, there is a lot of ground to make up.

China’s purchases have been a bit muted this year, but our biggest hurdle this fall was the long tail that the 75 million tonne  crop grown in Brazil in 2011 has proven to be. Over the next 120 days most soybean price direction will be driven by South American weather — good or bad. But in the long run it will probably be about Chinese soybean demand and whether corn will steal enough bean acres next spring to make the US 2012-13 soybean carryout uncomfortably snug.

black sea supply changes wheat markets
Last year’s wheat pricing opportunities were handed to us by a serve drought in the Black Sea region. This year’s discouraging prices are handed to us by a very large Black Sea wheat crop that they are very anxious to sell.

US wheat exports are expected to fall by more than 300 million bushels this year and unless things change soon that looks to be optimistic. The real question is whether the wheat price will be able to stay so much cheaper than corn that we feed enough of it to offset our poor export performance. Next year’s soft red winter acres in Ohio will be reduced sharply but we do expect other states and classes of wheat to pick up the slack. •