Market Update

Commodity markets remain in a very volatile state – especially based on events over the past two weeks.  The event that hits closest to home is the flooding.  From a national perspective the planting delays for corn across the Midwest and dry conditions in the S. Plains are keeping markets on edge.  Finally, the supply and demand report released two weeks ago caused a brief reaction by market participants.

The supply and demand report projected more corn, cotton, rice and soybeans will be carried over from the 2010/11 marketing year as compared to the April report and higher than pre-report expectations.  The news sent markets reeling for the next few days.

It did not take long for prices to start moving higher as concerns regarding the 2011 season regained control of the headlines.  Planting delays for corn and rice in key states – although, with respect to corn, Iowa took a huge step forward two weeks ago while Illinois, Indiana and Nebraska all made strides last week to catch up – are keeping fears alive of potential yield reductions.  For cotton and soybeans, delays are starting to crop up but there is also sentiment that some acres could transition from corn to, say, soybeans thus offsetting the potential production losses.   On top of this, dry weather from west Texas through Kansas appears to be having a negative effect on the nation’s wheat crop.  All of this combined has pushed prices for these crops higher over the past few days.

The exception here is cotton which has seen it’s price decline Thursday and today.  Lagging exports and economic struggles have the cotton market on edge.  Cotton demand is quite sensitive to price changes and, of the commodities mentioned here, would most likely be the first to see it’s demand deteriorate as consumers grapple with higher prices across all spending categories.