Analysts see turmoil in crystal ball

All depends on the weather | One broker expects ‘extremely volatile, wild, unpredictable’ prices

The prospect of normal production is spooking crop markets and turning many analysts bearish.

However, people attending the Grainworld conference held Feb. 25-26 in Winnipeg heard two presentations that gave 2013-14 a big bullish spin.

“There simply is little room for errors in production,” Mike Krueger, an adviser and broker from Fargo, North Dakota, told the conference.

“I think this crop’s going to stay extremely volatile, wild, unpredictable until we get to early summer and see what’s going on.”

Krueger offered a wide price range guess for 2013-14, with corn $4.50 to $9 per bushel, soybeans $10 to $20 per bu. and hard red spring wheat $7 to $12. The low range applies to a northern hemisphere summer that receives good weather, while the high end is possible if a significant weather problem develops somewhere.

The U.S. Department of Agriculture recently shocked producers, analysts and investors when it predicted 2013-14 average prices of $4.80 per bu. for corn, $10.50 per bu. for soybeans and $7 for soft red winter wheat.

That is far beneath today’s prices and much less than the extremes hit in last summer’s rally, but it is what the USDA feels is reasonable if world farmers get average weather.

Krueger agreed with the USDA estimates and its assumption of normal weather, but he also said any significant weather problem could spark rallies that could “quickly, quickly set new all-time highs in corn futures.”

Harold Davis of Prairie Crop Charts provided another bullish take on the overall crop markets.

“The big picture outlook on commodity price charts is one of a decade-old accelerating bull trend that provides powerful underpinning to current prices and seem set to push grain and oilseed prices much higher in late 2013 and 2014,” said Davis in an interview before his presentation at Grainworld.

Davis’ view is based on technical analysis of charts rather than the supply and demand fundamentals that Krueger looks at.

Davis said many crop markets show a pattern of rising lows and repeated highs, which suggests another major rise is likely.

Most of the crop-specific outlooks at Grainworld were bearish, seeing either heavy world supplies, as with wheat and oilseeds, or rebuilding world supplies, as with corn.

About the author

Ed White's recent articles



Stories from our other publications