Corn Price is More than Supply & Demand

December 6, 2010 02:34 PM
A quick glance at today’s supply and demand situation for major agriculture commodities will leave many people to believe all is well. For the most it is, but there are lots of threats to a prosperous farm economy that we need to watch, says Greg Wagner, and independent commodity market analyst based in Chicago. Wagner spoke at the 2010 Farm Journal Media Marketing Rally last week in St. Charles, Ill. 

"Everyone looks straight ahead and sees the supply/demand balance sheet, but you have to look at the periphery," says Wagner.
Among the key domestic issues he’s watching are:
  • An unresolved economic situation here in the U.S.
  • Concerns about residential home mortgages
  • Banks are still easily not lending money
  • High consumer debt to income ratios
  • High unemployment figures in the U.S.
  • Unresolved issues about economic stimulation.

Couple these concerns in the overseas markets, and it might be difficult to not call Wagner a commodity bear. Wagner points to issues with China’s currency and the desire for Western governments pushing them to increase the value of the yuan. Western Europe’s continued financial woes are also reason for concern. "Our concern is any land mines that may still be out there haven’t been uncovered."

But all is not lost. So maybe Wagner is a optimistic bear, or an extremely cautious bull.
"I’m cautiously optimistic. I think fundamentals justify prices where they are. A lot depends on what happens with the dollar. How the dollar behaves over the course of the next two to three months."

Policy is also not out of the question for impacting commodity prices yet. Extension of the ethanol blenders credit tops that list.   

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Spell Check

12/7/2010 12:09 PM

  It has been decades since supply and demand guided commodity markets or the stock market. There are too many speculators trading in both markets betting on the ebb and flow of market prices on a daily basis for supply and demand to have the affect it once did. While I hate having more government regulations, there should be regulations to prevent people from buying and selling the same commodity or stock several times a day. The economy would probably be much more stable if there were time limitations place before you could sell a commodity or stock you have purchased Buying and selling stocks should be an investment in the company and not just another spin on the roulette wheel. If there were a six month to year minimum time to hold onto a stock before selling it, the stock market would stabilize. Making traders hold onto commodities for at least a few weeks would also take out much of the volatility out of commodities as well

12/7/2010 03:41 PM

  Here's a rule change that would make speculation a lot more interesting. If someone sells a contract and doesn't cover it by buying a contract for the same trading period must deliver the commodity they contracted to sell at the contracted price. By like token, if they buy a commodity they didn't cover by selling a contract in the same trading period, they must take delivery of the commodity they contracted to buy at the contracted price.


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