Posted: Thursday, February 14, 2013 12:00 PM
'If it wasn't for the speculators, we wouldn't have $9 per bushel wheat'
By MATTHEW WEAVER
U.S. wheat prices will continue to track corn prices this year, a national marketing expert says.
The price of corn will depend on overall corn production in areas hit by drought last year, Kevin Van Trump, CEO of Farm Direction in Raymore, Mo., said.
Corn prices could drop if total production reaches record levels, he said. The drought impacted the country's biggest corn producers, Van Trump said. If Illinois, Iowa and Indiana get more moisture and produce big corn crops, corn prices won't be nearly as high as last year, he said.
Record corn production could mean large corn stocks, pushing prices down to $3 or $4 per bushel. If corn production remains even with last year, prices could remain in the $5 to $7 per bushel range. If corn supplies shrink further, prices could hit $10 to $12 per bushel, he said.
Wheat prices will follow those trends, he said. Demand for wheat flour is largely stagnant, Van Trump said, so wheat could see increased competition as feed if corn production rebounds and its price falls.
Van Trump delivered his agricultural economic forecast during the Spokane Ag Expo and Pacific Northwest Farm Forum in Spokane.
Van Trump said big money players like Bill Gates and Warren Buffett are entering the agriculture industry because they see lots of opportunity.
"You folks all have your own little businesses, and they can come into this and grow really fast," he said, noting the big-money players are all about gaining market share as opposed to making an immediate profit. "They're looking for a 20- to 30-year return on their money, so they're buying the ground."
More farmers are considering crop share with such players, Van Trump said. He believes investor interest will likely focus on dryland ground. Gates and Buffett want to move their money to develop dryland production technology, he said.
"Once they capture market share, they enjoy seeing prices drop," he said. "They have deep pockets. They survive. They look and find little guys who can't survive and gobble them up, get more market share. They're fine with prices dropping."
Speculators dominate the commodities market, but Van Trump said there is value in having them there.
"If it wasn't for the speculators, we wouldn't have $9 per bushel wheat," he said. "The speculators overdo everything, to the upside, to the downside. What we have to try to do is get the hell out of the way when they're moving to the downside."