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Good: Volatility may only be beginning

Darrel Good says this may only be the early part of commodity market volatility.  The University of Illinois agriculture economist tells Brownfield Ag News that South American weather problems, currency fluctuation and strong usage resulted in the latest corn and soybean market rally.

“There was a little bit of bullish news that got the market excited,” Good told Brownfield Ag News Wednesday.  “There hasn’t been a lot of follow-through at this time, but that’s certainly what triggered it.”

Weak Brazilian currency pushed expansion in Brazil’s production, however Good says that as the real has strengthened in relation to the dollar, the production incentive has been reduced.

“I think it’s kind of a double edged sword,” said Good.  “It points to a little better demand for U.S. crops, a little less competition in the year ahead from South America.”

There’s also adequate disappearance of commodities to sustain the market.  Good says the pace of consumption is higher than what’s required to meet USDA projections.

“I think we probably are on track for having slightly smaller year-ending stocks than currently projected and if problems in South America have been significant, we could see an even stronger export market than now anticipated,” said Good.

Short term price projections depend on how much corn and soybean production has been reduced in Brazil and Argentina, he said, but he adds that prospects for the size of the 2016 U.S. crop will be the main price driver for the next four months.

AUDIO: Darrel Good (7 min. MP3)