Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
Two political issues impacting grain and oilseed markets received rulings this week. First, USDA reached a decision not to allow farmers early release from Conservation Reserve Program contracts. This decision was weighted heavily by a recent federal judge’s ruling in Seattle issuing a permanent injunction against USDA’s critical-feed use program releasing acreage from CRP for haying and grazing. Second, the U.S. House of Representatives defeated a bill yesterday that was designed to prevent excessive speculation in commodity futures trading. Both rulings can be viewed as bullish.
The U.S. needs to bring into production an additional 5 to 7 million acres in the ’09/’10 marketing year. A key component of whether the CRP ruling is good or not will is whether the August 12th supply/demand report projects adequate supply to forge ahead into the 2009 crop year. If not, the CRP ruling is likely to be contested, eventually, requiring an act of Congress.
The defeat of the anti-speculation act comes at a time when more needs to be known in order to make a definitive ruling. What is the driving force behind high oil, corn, soybean, and wheat prices? To what extent, if any, are the high prices to be attributed to speculation within the various commodity markets? Commodity trading is a complex business. Increases in speculative trading create opportunities to sell at higher prices than they otherwise would have been. Most ‘free market’ commodity traders and analysts argue that the markets do not need government intervention. Nevertheless, the issue of commodity speculation is likely to come up again.
Perhaps the best way to solve high oil and other commodity prices (other than high prices cure high prices) is for Congress to act upon a viable energy policy aimed at increasing U.S. energy production and supply. During a recent phone conversation an informed individual stated, “In France, where 70% of their energy needs are generated by nuclear power, the spent rods are processed thereby eliminating the waste.” One has to wonder why that point of information is not a known fact in this country. Or stated another way – to what degree is that point of information known in this country? If we can solve the nuclear waste problem then will that be enough to squelch concerns about building additional nuclear power plants?
Market Strategy
USDA will release the next supply/demand report for U.S./World Grains & Oilseeds on August 12th. Of interest will be projected stock situations for corn, soybeans, and wheat that will shed light on how many acres the U.S. will need to plant in the 2009 crop year? Currently, Dec ’08 corn futures are trading at $6.13 per bushel; Nov ’08 soybean futures at $14.05 per bushel; and Dec ’08 SRW wheat futures are at $8.12 per bushel. For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.