Could cheap commodity prices finally be doing their intended job on the market - increasing demand for soybeans, corn and wheat, pushing down stocks and possibly setting the stage for higher prices later on?
Let's hope so. USDA reported that old crop corn stocks in September were down 4 percent from one year ago, while soybean and wheat stocks are down 17 and 3 percent respectively.
In corn and soybeans, half of the stocks were on-farm, compared to almost three-fourths of all old crop wheat stocks.
In addition, USDA is also expected to trim its production forecast for corn and soybeans on Oct. 12 due to continued damage from heat and drought in July and August.
Meanwhile corn prices are about 8 percent cheaper than they were a year ago, which has led to increased exports of corn and soybeans in the last few weeks, according to USDA.
"We saw very good export numbers," said Tom Leffler, broker at Paragon Investments in Silver Lake, Kan. "With lower production numbers next month, and seeing these tighter stockpiles today, we ought to see grain prices increase in the last part of this quarter going into 2001."
Cheap grain is also attractive to cattle ranchers. USDA said 8.98 million cattle were being fattened for slaughter as of Sept. 1, a record for that date.
"I can see higher prices down the line," said P.J. Malone, a broker at Walsh Trading Co. in Chicago. "We still have ample supplies, but ample supplies have a way of disappearing when prices are cheap."
Although July's U.S. corn exports rose 234,000 tons from June, the 39.5 million tons of corn exported in the year-to-date remains 7 percent below last year. Cumulative corn export value is down 9.5 percent to $3.8 billion.
In more bearish news, large global stocks will continue to weigh on corn prices. And USDA reports that production gains in both importing countries and competing exporters are increasing export competition this year.
The other bright spot among bulk commodities is cotton. At $1.6 billion and 1.3 million tons exported already this year, U.S. cotton exports are up 33 percent in value and 64 percent in volume over last year. Global import demand is up, as world consumption exceeds production. Much of the growth in global consumption demand is in China where production has fallen more than consumption is rising.
Private industry estimates the 2000 U.S. cotton crop at between 17.1 million and 18.3 million bales. The current USDA production estimate is 18.32 million bales. (A new forecast was released Oct. 12.)
The latest report from USDA tabbed weekly cotton export sales at the high end of expectations at 102,500 bales, up only 20,800 the previous week.