Market expert: Production boost weighs down prices
Many U.S. farmers saw larger corn, wheat and soybean yields than they expected in 2013, said Kevin Van Trump, an agricultural marketing expert.
“I guess that’s a good problem to have, more bushels than you thought you were going to have at one point in time,” he said. “The bounce back in production is probably the biggest surprise” of the year. Drought reduced yields in many parts of the nation in 2012.
But that bounce in production is helping to weigh down prices, the CEO of Farm Direction in Raymore, Mo., and producer of the daily Van Trump Report said. Wheat prices in particular are having a hard time rallying after several strong years riding the coattails of spiraling corn prices.
Van Trump returns to the Spokane Ag Expo after making his debut in 2013. He delivers his agricultural economics forecast at 9 a.m. Feb. 5 in Salon IV at the DoubleTree Hotel.
“I enjoyed all the people up there, it was a great trip,” Van Trump said of his 2013 experience, noting that he got to chat with a lot of his customers.
Last year, Van Trump predicted big-money players, drawn by opportunity, would enter the commodities markets. This year, he said, some of them are starting to phase out of the agriculture market. In the United States, companies like J.P. Morgan are starting to sell some of their commodity assets.
“They’re actually starting to backpedal a little bit,” he said. “We’re seeing a substantial amount of money being reallocated into the equity side of things. It tends to take some money away from the ag sector.”
That means farmers could see less volatility in prices, but that also reduces the extreme upward price swings that come with that volatility, Van Trump said.
“You might not see prices move that high because there are fewer big players in the game to push that rock up the mountain,” he said.
The major grain market factors Van Trump anticipates in 2014 include foreign competition, with South America having a record soybean crop and the Black Sea region working to become the world’s low-cost provider of wheat and corn.
“The United States has gone from being the world’s leading exporter or bean supplier to now being the residual supplier,” Van Trump said. “Everyone looks for the cheapest stuff they can from the poorer competitors.”
If there’s a long lineup or logistical problems on deliveries, then they’ll turn to the United States, he said.
“That’s going to hurt our exporters and that’s weighing on the minds of some traders,” Van Trump said.
Van Trump advises farmers to work to capture the highest prices while marketing their commodities.
“Trying to reduce our risk is going to be the number one thing,” he said. “Having strategies in place and trying to find ways to eliminate some of the risk and exposure on the downstroke is going to be the key move, for at least the next year or two.”