Iowa Public Television


Market Plus: Jun 18, 2004

posted on June 18, 2004

Market Plus: Jun 18, 2004

Pearson: Welcome to the Market Plus segment here on Market to Market, I'm Mark Pearson and this week our senior market analyst joins us, Mr. John Roach. And, you know, John we've been talking all spring and most of the winter on this real up, demand based market, prices just exploding in most commodities and now we're seeing this bean market recoil, corn market recoil, wheat market recoil, cotton recoil, cattle has been okay and hogs have been okay, but on the grain side we've gone from an upper to a downer. What's going on?

Roach: Well, the reason that we had the up market this past year, several things all came to the intersection at the same time. First, the very strong economic growth in China really stimulated demand worldwide in just about every commodity that you can mention including agriculture commodities. Following that, or about the same time, the United States had a very dry last half of the year and certainly at the same time Europe had the worst drought that they'd had in 100 years. And then after the first of the year we realized that South America was going to have a crop problem as well. So, we had crop problems in three major production areas of the world together with major demand and those all peaked at the worst of the Brazilian weather situation. Now, since then we've seen that the Chinese demand would be reduced somewhat. We didn't know for sure how much but we have certainly seen them walk away from some cargos of soybeans as was talked about in the show. And we were worried about dry weather in this country, which we've since alleviated with lots and lots of rain. So, we've really gone from seeing all the bullish news in front of us to now seeing perhaps the best of the bearish news, if you will, which is we're going to have big crops in the United States.

Pearson: And that's the mindset right now and historically, I don't know, John if we could go back and look but when we have wet, rainy springs like this it does not necessarily guarantee any kind of a bumper crop in the fall does it?

Roach: Elwin Taylor, Dr. Elwin Taylor from Iowa State University said that only two out of 100 years where we've had too much rain did we have national yields reduced from trend line. So, rainy weather and poor crops or poor yields just really don't go hand in hand although it feels bad, the reality is when I come look in the state of Iowa now in the central part of the state after not seeing this crop at all this year, I guess I was back in April, it's lush, it's absolutely lush out there and that normally gives us good yields. The part that we want to keep in mind, however, is that we are now dealing with what looked to be big crops and poor Chinese demand. The poor Chinese demand is not going to stay poor. The Chinese will be right back in the marketplace, they just got themselves into a little bit of an overbought situation and the problem was the bird flu that they had and the producers in China backed away from feeding birds until they saw this disease get under control. They'll be back feeding birds, the economy continues to be growing at a very strong pace in China and we're going to be back dealing with that Chinese demand again.

Pearson: Outstanding, John Roach, as usual, we appreciate you joining us here on the Market to Market Market Plus segment and for all of you out there who have tuned into this site, be sure to tell your friends and neighbors. And for all of us here on Market to Market we wish all of you a great week.

Tags: agriculture commodity prices markets news