FARMERS KEEP EYE ON RISING COMMODITIES MARKET
By Stephen Singer
As commodity prices rise, so does Kenneth Oswalt’s optimism.
Low supply and high demand are giving the Lee County corn and soybean farmer good reason to look forward to a better-than-average income when the season ends this fall. “Prices are real good,” he said. “If we get a good crop, we’ll make some money.”
But Oswalt, who farms 1,500 acres of soybeans and 600 acres of corn in Nettleton, Tupelo and Saltillo, knows enough to temper his outlook. “It all depends on the weather.”
As in most economic equations, good news for the seller can be bad news for the buyer.
The price of commodities is “not a pretty thing for us,” said Pat Shea, spokeswoman for Marshall Durbin Cos., a Birmingham-based poultry processor. Durbin, which employs 130 workers at a processing plant and hatchery in Tupelo, is bracing for record high feed prices that threaten to send its costs soaring.
Consumers may see “very minimal” price increases for chicken and chicken parts, Shea said. “We’ve not seen any large price increases.”
Prices increase regularly because of reduced supply or higher demand. But both conditions – low supply due to poor weather last year and high demand caused by rising exports, particularly to China – are now in play.
The result is that commodities prices are at their highest levels in 20 years.
For Mississippi, farm income could rise by nearly 7 percent, from $4.4 billion last year to a record $4.7 billion at the end of this season, said Rodney Foil, vice president for agriculture, forestry and veterinary medicine at Mississippi State University.
Projected July prices for soybeans are $8.30 a bushel, nearly one-third higher than last year’s futures price of $6.31, said Gerry Hildebrandt, a trader at ING Institutional Services Group in Chicago.
As of Wednesday, the price of wheat projected for July was $6.36, 77 percent higher than last year’s $3.59.
And corn is projected to fetch $4.82 a bushel in July, a whopping 86.8 percent above last year’s $2.58.
Commodities brokers have told Shea that corn prices have moved up $1 a bushel in the last three weeks. “Generally, it would take three or four months to move $1,” Shea said.
“We’re coping as best we can,” Shea said. “We’ve seen the cycles before. We’ve been in business since 1930, so we’ve seen a lot of cycles.”
Marshall Durbin is relying on corn stored from last year and company buyers are committing only to those purchases that are necessary, she said.
Farmers are responding to the higher prices for corn with wholesale switches from cotton farming. Some moves to corn also are due to fears of a repeat of last year’s devastation of Mississippi’s cotton crop by the tobacco budworm.
Corn acreage in Mississippi has nearly doubled, from 300,000 acres last year to 500,000 acres now, said Bob Williams, an agricultural economist at Mississippi State University.
Cotton acreage has fallen in the same period, from nearly 1.5 million acres to 1.2 million, Williams said.
At the same time, farm land for wheat and soybeans has grown by 50,000 acres each.
To push down prices, farmers, policy-makers and others must “enforce the market,” Hildebrandt said. This requires slaughter of cattle that rely on grain feeds, pressure on U.S. trading partners to import from other nations and similar measures to reduce demand, he said.
China also has begun growing more crops to reduce imports, he said.
The last time such tactics were used to cut grain use was in the mid-1970s, Hildebrandt said. Prices then were up 50 percent and use of feed was reduced by 18 percent.
This year, prices could rise by up to 90 percent and feed use has so far been reduced by only 11 percent, he said.
Large-scale slaughter of cattle also could complicate poultry producers’ price calculations, Shea said. A reduced cattle supply would push down beef prices, making it more attractive to consumers. That is prodding poultry producers to keep price increases to a minimum, she said.