Hello, I'm Mark Pearson.
Conflicting government economic reports and a holiday weekend softened the nation's financial markets. A report from the Commerce Department indicates the economy's growth is slowing after a robust first quarter. Another report confirms Americans, despite weaker growth in personal incomes, are continuing to spend at the retail level. Spurred by low interest financing, sales of big ticket items like autos were strong in July.
In Rural America the economy continues to be defined by the weather. But this week there was growing evidence that markets are now defined as much by a mosaic of supply, demand, government subsidies and international currency fluctuations as by drought or rain.
Despite weak yields, there hasn't been much progress in fields growing later-maturing soft wheat varieties. Only 54 percent of the harvest has been completed, well below the normal pace. The slow going has been especially frustrating in light of strengthening wheat prices.
In the Corn Belt, rains may have helped the condition of corn and bean crops. Even so, 58 percent of the corn and 78 percent of the soybean crops are rated as no better than fair.
Price rallies for those crops were dampened by the rains, especially in the bean pits. It's generally believed rain can rejuvenate stressed soy plants. But many of the sale orders were, notably, initiated from Brazil. By some estimates, as much as a third of next year's Brazilian soybean crop has been sold on the board. That's about three times the normal amount of hedge sales made by the growing agri-giant.
The aggressive hedge sales may pressure near-term price prospects for American farmers. But Market to Market analyst Sue Martin says they could also be laying a longer fuse to a more explosive market.
Sue Martin: "…By the time they start to plant in October, I'll bet we'll have 50 percent of their new crop sold ahead. What happens if they have a weather problem? I think you'll be looking at a ballistic market."
Indeed, by week's end the bean market was beginning to rally on news the Chinese are buying and the prospect supplies are tightening.