David Moll, Outreach Specialist
Department of Agricultural and Applied Economics
UW-Madison College of Agricultural and Life Sciences
Phone (608) 262-8916
Recap and trends in the grain market
3:32 – Total Time
0:19 – Recap of 2011 corn market
0:32 – Elements of grain demand in 2011
0:56 – Demand markets for corn
1:18 – Demand markets for soybeans
1:40 – Forecast for 2012
2:36 – Price swing triggers in 2012
3:11 – Advice for producers
3:21 – Lead out
The roller coaster grain markets! And, we’re visiting today with David Moll, Department of Agricultural and Applied Economics, University of Wisconsin, in the College of Agricultural and Life Sciences, Madison, Wisconsin…and I’m Sevie Kenyon.
Sevie Kenyon: David, welcome to our microphone. Can I get you to recap the grain markets?
David Moll: It’s been a… really a roller coaster of a year this past year with, reaching all new time highs for the corn market in the high 7 dollar range.
Sevie Kenyon: What are the elements of demand in the year just gone by?
David Moll: The big things have been from the ethanol side. That’s one huge driving component. The livestock industry has been continuing to rebound and then exports have stayed fairly stable… this past year, which led to some of these all-time highs we saw in the corn prices and similarly in soybeans.
Sevie Kenyon: David, can you give us a sense of how the crops are divided up on the demand side?
David Moll: On the demand side for corn, about 40 percent goes to livestock feed, and this has historically been the largest category for corn. Additionally, ethanol has been a growing demand center; this past year, using just about 40 percent. And then exports are an additional… around that 20 percent area.
Sevie Kenyon: And that covers the corn side of things… would you care to speak about soybeans?
David Moll: Predominantly, most of our soybeans still go into the domestic-use category from soybean meal and soybean oil, but soybean exports continue to be a critical component, taking about 35-40 percent of the soybean side, and domestic crush is right around 50 percent.
Sevie Kenyon: Well, David. Can you look into your crystal ball a little bit and tell us what’s ahead for 2012?
David Moll: Well, realistically, this past year we had huge crops and strong demand and the demand is expected to continue going into this next year, but realistically it creates an environment with really tight ending stocks and when we have that we see very large increases in price to try to curb consumption and increase production in the coming year. And, so that’s what the market’s trying to tell us with where prices are at now.
I would say though too, that because we’re in this tight ending stocks environment that price is really fragile, even though were at this really high price level. We could really drastically go up in price, because of how tight ending stocks are, if we have production issues this next year. But, prices could also retrench on the other side, and really be a lot lower in the coming year. Very small changes within the U.S. corn or soybean balance sheets could end up really driving prices one direction or the other in fairly dramatic fashion.
Sevie Kenyon: David, can you give us an idea of what might trigger price swings in the year ahead?
David Moll: A lot or about 60 percent of our exports for soybeans go to China. They are a huge player within that industry, so whether or not something occurred where they really reduced their consumption or really continued to grow on their consumption, that would be a huge transition.
At some point, it’s possible the U.S. dollar ends up really strengthening and does slow up the export market—that could be another really critical factor—that’s been something that’s really helped support prices here over the last two years since we’ve had the financial recession in the U.S.
Sevie Kenyon: And David, do you have any advice for the producers out there?
David Moll: Managing one’s financial risk is really critical, so managing what your inputs costs are along with doing some kind of marketing to really protect one’s self, I think, is really critical.
Sevie Kenyon: We’ve been visiting with David Moll, Department of Agricultural and Applied Economics, University of Wisconsin, in the College of Agricultural and Life Sciences, Madison, Wisconsin…and I’m Sevie Kenyon.