|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
 |
|
|
|||||||||||||||||||||||||||||||||||||||||||
 |
|||||||||||||||||||||||||||||||||||||||||||||
|
SDSU 2004 Commodity Price Outlook Online Prices for corn, soybeans, wheat, and cattle have been volatile early in 2004, and the worst thing you can probably do is to sit on the selling sidelines and do nothing. “You want to be an active risk manager with these four commodities with the prices and the volatility we’re seeing,” says Matt Diersen, South Dakota State University extension risk management specialist. “You can’t be a passive marketer and just tune in once in a while.” Diersen and SDSU extension grain marketing specialist Alan May have written a 2004 Commodity Price Outlook Booklet that covers fundamental factors driving prices. The 38-page booklet uses basis charts, supply and demand charts, and text to give a price outlook for corn, soybeans, wheat, barley, oats, grain sorghum, cattle, hay, and hogs. The publication is available online in pdf format online at http://econ.sdstate.edu . Under the “Extension” tab, select “Tools and Publications” then “EMC 926 - 2004 Commodity Price Outlook Booklet.” A glance at some of the factors May and Diersen see affecting major commodities: Cattle: In the short run, the markets are still responding to daily updates of news and information about the United States’ first case of mad cow disease, discovered in December. Supplies are very tight in the short run, but larger supplies are coming. Longer term, the profitability outlook is good, as the number of cattle outside of feedlots is down from a year ago. That suggests that in the latter half of 2004 and in 2005, we should see relatively high calf prices and feeder cattle prices compared to the past four or five years. Corn and soybeans: Demand for both commodities is very strong, outpacing production, and there is optimism in these markets because of low carryover stocks, with prices that may be unusually sensitive to factors such as weather. Wheat: Demand for U.S. wheat hasn’t been as consistent as for corn and soybeans, but prices nevertheless are stronger than in recent years. Planted winter wheat acres are down (and spring wheat may be as well) which may provide some upward price support. Following is their advice to consider for managing grain prices in 2004: “It is important to evaluate production costs and to create a marketing plan in order to capture cost of production and profit. It will be important to evaluate forward pricing strategies that will lock in a floor price with a hedge, a cash forward contract, or with a put option. These strategies will protect against any price decline after the pricing strategy is employed. In addition, this year may offer opportunities to take advantage of rising prices after a floor price has been locked in either through a futures hedge or a cash forward contract. This could be accomplished by purchasing at the money or out of the money call options. This type of strategy is often referred to as a synthetic put. Option premiums will likely be an issue that determines the purchase of at-the-money or out-of-the money options. With any of these strategies, it will still be important to know the county loan rate value so that any of the above-mentioned combinations do not establish a floor price that is lower than loan rate.” Find a weekly review of corn, soybean, wheat, and livestock markets online at http://econ.sdstate.edu . Under “Extension” click on “Current Market Analysis.”
The basis calculated in the above charts come from counties in northeast S.D. “This is weekly data; we calculate the basis Thursday of each week using the futures closing price for the nearby contract of each commodity and the average cash price for each commodity from this region,” explains Alan May, SDSU extension grain marketing specialist. Updated basis charts by region in South Dakota can be found in May’s weekly corn, soybean, and wheat market review online at http://econ.sdstate.edu . Under “Extension” click on “Current Market Analysis.” Basis Implications
|
|||||||||||||||||||||||||||||||||||||||||||||
