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Thursday, July 10, 2014 10:01 am

What’s the market doing?

Cattle are up, soybeans down. But that’s bound to change.

 If you are around people involved in agriculture, the question “What’s the market doing?” will eventually come up. While there may be variations – “How’s the market?” or “Anything going on in the markets?” – the question is really about prices for corn, soybeans, hogs, cattle and other commodities of interest to the questioner. The question is about what those prices are doing. For people involved in agriculture, markets mean price and price is central to agriculture.

To answer the question, let’s take a look at two markets – soybeans and cattle. First, soybeans.

The U.S. Department of Agriculture (USDA) puts out a lot of information that affects the markets. A recent key report detailed the number of acres planted for a variety of crops, including soybeans. As you drive around this summer, you will see more soybean acres than last year. USDA reports that this year 10 percent more soybean acres were planted than last and that is a record number of acres planted. There are a few more acres of soybeans in Illinois and Indiana this year, but the big gain was in Iowa, where almost 1 million more soybean acres were planted this year than last.

So, after the planted acres report came out, the question was asked, “What’s the market doing?” The soybean market did not do too well. It reacted badly to all of those unexpected acres – soybean prices dropped 70 cents a bushel. For a farm that planted 500 acres of soybeans, that 70-cent decline could result in a $15,000 drop in the value of the crop, all in one day, because of a report from USDA.

It is another story for the cattle industry. As has been widely reported, the U.S. cattle herd is the smallest it has been since 1951. The herd has been steadily shrinking for the past eight years. So, with the smallest size herd seen for more than half a century, asking “What’s the market doing?” will receive an answer different from the soybean market. Cattle prices today are 25 percent higher than in February and more than 40 percent higher than last July. You may have noticed the price change in the grocery store when you shopped for some beef to grill for the weekend barbeque. The high price of soybeans last year resulted in a record number of soybean acres planted this year, and prices have dropped as a consequence. So, when will high beef prices result in a larger national cattle herd which will result, eventually, in lower prices? The general consensus is the herd is slowly rebuilding, but prices are expected to remain strong through 2015. So, eventually, when someone involved in cattle asks “What’s the market doing?” the response could eventually be “Prices are going down.”

Next time you are around someone in agriculture, ask “What’s the market doing?” It could make for an interesting conversation and a real learning opportunity.

Professor William C. Bailey of the Western Illinois University School of Agriculture formerly was the chief economist for the U.S. Senate Committee on Agriculture, Food and Nutrition. He also has served as deputy under-secretary of agriculture.

Also from William C. Bailey

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