wmeubank@ocp.kcmo.com
RIPE FOR CHANGE...
Prepared by
Commodity Information Systems, Inc.
In recent years, commodity markets have adopted a central belief...shortages in one nation can be offset by imports from another!
That belief was tested this year when the U.S. imported Brazilian soybeans for the first time. It will also be tested in months ahead when Argentina imports U.S. soybeans for the first time. The concept was pushed even further when Brazil “oversold” their soybean crop at high prices last summer and plan to meet domestic needs by importing low priced American beans this winter. Now it appears that China may be planning a similar tactic with corn.
This concept has worked well to date. It halted price spikes by smoothing out shortages with larger production and/or imports from other nations. However, it deals with only half of the equation...the supply half. Going unnoticed is the fact that by holding down price, demand has become an invisible force that has yet to be tamed!
The world has increased production to record levels...expanded trade by leaps and bounds...and, utilized nearly all reserve stocks in an effort to hold down price. However, demand continues to creep higher, consuming nearly all the supply made available with these new measures.
The corn market could become the real test for adopted belief in supply management. The marketplace has consistently underestimated demand for three years and appears to be repeating that mistake again this season. If supply can be managed effectively once again, we expect prices to advance into the $3.25 to $3.50 area by next spring. However, if supply cannot be micro- managed, demand will overtake the marketplace and price will become the only defense against critical shortage.
Few opportunities are as well defined as the one now developing in corn. Conditions are ripe for a shift from a supply nwnagement...to a demand driven market environment. If this occurs, profit potential will be dynamic. Therefore, those with a prepared mind and courage to act while price and risk are low, will hold an advantage as events unfold in coming months.
October 4, 1997Bill Gary
Commodity Information Systems, Inc.
1601 N.W. Exrpressway, Suite 1450, Oklahoma City, Oklahoma
Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com