The Enid News and Eagle, Enid, OK

November 24, 2012

Volatility in U.S. grain markets continues

By Rodney Jones, Extended Forecast
Enid News and Eagle

ENID, Okla. — By Rodney Jones

Dry conditions continue to challenge area producers. The USDA weekly crop progress report released early this week confirmed one of the poorest overall U.S. winter wheat crop ratings for this time of year in the history of the survey.

Poor crop condition ratings are no surprise to those of us in northern Oklahoma; however, some may not have been aware of the geographic magnitude of the poor conditions. Basically, the entire U.S. winter wheat producing region is currently impacted by drought.

With that in mind, why have overall grain markets been under so much pressure?

The answer lies in the fact markets are focusing on a variety of other factors. The soybean market has led the overall grain market decline over the past few weeks (really over the past few months). The U.S. crop is coming in significantly better than early estimates predicted. South America is planting a large number of acres, and weather conditions are currently generally favorable.

For feed grains, it is true current stocks are tight; however, there is plenty of time for conditions to improve in the corn belt prior to planting, and early estimates suggest a large number of acres will be planted. The markets are looking ahead at the potential for a large feed grain crop. That projection will evolve over the next several months and prices will fluctuate accordingly. There also is an element of fear and uncertainty regarding the health of the overall economy, both in the U.S. and worldwide, which could continue to impact the demand for agricultural products.

Obviously, over the past several weeks, the market has placed more weight on these generally negative market factors than it has on the declining wheat crop prospects, and prices have declined.

Looking forward, 2013 wheat production will be more of a price driver than domestic production has been for the last few years because both in the U.S. and worldwide stocks are tightening. A short U.S. crop will result in prices remaining high and perhaps somewhat more separated from whatever happens to corn prices as the year evolves. On the other hand, a good U.S. wheat crop likely will result in prices that follow the corn market, much like the past few years. Relatively tight stocks across the grain complex mean continued extreme volatility as prices respond to fresh news.

On another topic, we are entering the time of year when many agricultural land lease arrangements are renegotiated for a variety of reasons. Several resources are available through Oklahoma State University Extension to assist both land owners and tenants in making sound decisions and negotiating equitable arrangements.

First, information regarding recent general trends in land values and cash rental rates is available through the oklandvalues website. In addition, a couple of new websites have been developed to assist land owners and tenants.

The website is an OSU Extension effort to provide general information to the agricultural community, particularly land owners, regarding evolving production practices in Oklahoma and how that evolution may impact agricultural land leases. Decision-making tools, legal and tax information, tips for landowners and tenants, and answers to frequently asked questions are also provided on the site.

The website is a multi-state effort that provides informational publications regarding land leasing and example lease forms that can be easily adapted to a variety of situations.

Finally, for timely updates, like us on our OSUFarmManagement Facebook page. So, whether you are working on a crop share lease, a cash lease or are unsure about the alternatives, there is information available to help in the decision process.

Jones is Oklahoma Cooperative Extension Service area agricultural economics specialist.