Leading American crop market analysts are split on the 2010 outlook for the big three – corn, soybeans and wheat.
Year-ahead outlook sessions presented Dec. 15 and 17 revealed the crop outlook to be muddied by huge overhanging issues that dramatically influence crop prices but are hard to peg.
PFG Best grains analyst Tim Hannagan is bullish for corn, soybeans and wheat until midsummer. DTN market analyst Darin Newsom is bearish on all three crops.
The two are united in one observation: wheat will be the weakest of the three major crops.
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Newsom said governments around the world have allocated huge amounts of money to stimulate the economy. Some of that increase in the money supply has made its way into commodity markets. It is helping support the price of wheat, which would otherwise fall because of a negative supply and demand outlook.
“The wheat market is overpriced,” said Newsom.
“This market just keeps giving us signs that it needs to go down, that it wants to go down. It’s the most bearish of many commodities (including non-agricultural commodities).”
U.S. wheat ending stocks should end up at about 43 percent of usage, which is huge. The world ending stocks should end up at about 30 percent, which is large.
In comparison, U.S. corn ending stocks should be about 13 percent of use and soybeans around eight percent.
Still, Newsom is bearish on both corn and soybeans in 2010. He expects soybeans to briefly rise near the beginning of the year to about $11.55 on the Chicago futures contract, before selling off to about $8.82 in the second quarter and lower in the third.
Corn is likely to be weak all year unless there are major crop problems.
“Corn’s a bit overpriced in the upper $3, lower $4 range,” said Newsom.
“It looks like this market has some downside potential.”
Hannagan’s view is different. All crops will likely rise into the Jan. 11 U.S. Department of Agriculture crop production report, rise again on weather concerns from South America in January and February, and rise a third time in the “battle for acres” from March to May.
“Everything sets up for an encouraging month by month higher pace in the market,” said Hannagan in an interview after his presentation.
He expects the July Chicago soybean futures contract to rise from today’s $10.72 to the $11.75-$12.25 range by late June. He expects corn to rise from $4.24 to the $4.75-$5.50 range.
“Wheat will be the follower,” he said.
Newsom’s darker view is based on a combination of the bad fundamentals for wheat and corn and weak fundamentals for soybeans with a deflating world equity-commodity complex once the stimulus money runs out and people begin considering supply and demand more seriously.
Hannagan’s colleague, Phil Flynn, also gave an extremely bearish view of most commodities outside of agriculture based on the same expectation of a slump after stimulus money is gone.
But Hannagan’s optimism about the big three crops is based on his belief that crops are profoundly different from other commodities and will escape outside weakness.
“It’s very different. They’re two different ideas. Two different markets. They’re oil and water. Don’t mix up the two,” said Hannagan.
“We don’t need crude oil. We need corn. We need beans. These are food commodities. It’s a different psychology.”
