The next congress hasn't arrived yet, but the chairs are already being shifted as are some congressional priorities.
The attempt to produce an energy bill in this congress has been abandoned. It will be a priority with the next, but the subsequent version may not promote ethanol or bio-diesel production.
That prospect provokes serious concerns for American grain and oilseed producers. Prices have been supported this year by solid export sales and drought-lowering yields. But, slowing domestic feed use and growing foreign competition is muddying the longer-term outlook for traditional crops. That's hardly good news for producers, many of whom are still in the field.
No matter the tardiness of the field work, the USDA this week released production numbers for 2002 crops. The government forecasts the corn harvest at 9-billion bushels, five percent below last year's output. The estimate for soybeans is 2.69 billion bushels, seven percent below last year's harvest. The cotton harvest is projected to finish at 17.82 million bales, 12 percent below last year's record production.
The new numbers were within trade expectations, futures prices remained firm due in large part to the activity in the soy complex. Nearby soybean futures prices continue to be higher than those for more distant delivery months. Such a price inversion is rare, and hasn't occurred at harvest in 30 years.
The phenomenon is attributed to a dramatic shift in the pattern of global production.
Doug Jackson (from market plus 2805: "Well, we have a real problem here that we're running out of acres here in the United States. Bean acres are going into corn and wheat and all the bean acres have to shift to South America. That leaves these people with crushing plants in the United States with a limited fixed topped out supply of beans and that's going to mean pressure on crushing margins that are based on U.S. futures. The U.S. is going to be this bizarre island of tightness with strong basis, strong spreads but maybe not high flat price."
The U.S. also caught another glimpse this week of an emerging issue that could affect U.S. grain producers – how to handle commodities in an era of genetic modification.
Soybeans contaminated with biotech corn were placed in quarantine. According to the USDA, volunteer corn from a restricted biotech crop grown in Iowa last year by ProdiGene for industrial use sprouted in a bean field and was not properly removed. The corn contained genes engineered for non-food application such as pharmaceuticals and industrial enzymes.