The agriculture commodities markets have recently experienced historic levels of volatility. The U.S. Department of Agriculture on Monday released its plantings report, which outlines what farmers intend to grow this year. The news that they're looking to plant fewer acres of corn and more acres of soybeans and wheat is especially interesting to commodities traders — but it has implications off the trading floor, too.
On the agriculture trading floor at the Chicago Board of Trade, traders are staring up at the price boards around them, waiting to act on the USDA's planting report numbers.
Matt Fink has been trading here since 1991.
"Really, right now it's 9:01, and I still have no bearing as to where the market is going to be," he says. "I just say let it open and put your big-boy pants on, because it's going to be something. I don't know what it's going to be, but it's going to be something."
Fink has a plan that he hopes will make him some money today: "I'm going to stand back and let the market digest a little bit — because it's going to be wild; there's going to be a lot of gyrations — be very cautious and see if there is some kind of trend I can pick up during the day."
Plenty of other traders are raring to go when the market opens at 9:30 a.m.
Cutting Back on Corn
The USDA reports that farmers intend to plant 8 percent fewer acres of corn this year than last. In 2007, farmers planted the highest number of corn acres since World War II. There are a few reasons for the cutback, including concerns over high fertilizer costs and the need to rotate crops.
Farmers are also getting good prices for the other things they grow, and the USDA report reflects that. Soybean acreage is expected to be up 18 percent this year. That news sends soybean prices at the Board of Trade tumbling.
But Fink's trades are going well. By lunchtime, he decides to call it a day — a successful day. He has made money with trades on corn, soy and rice. He won't say how much.
Impact at the Supermarket
The planting report is a bit more of a mixed bag for people who aren't traders. Grain analyst and longtime trader Vic Lespinasse explains: "It could mean somewhat lower prices at the grocery store, as far as, say, bread is concerned, and as far as salad oil, salad dressing is concerned. Things that are made from wheat and soybeans could be heading down a little bit."
If farmers plant the crops they plan to, there will be more soybeans and wheat in the market. That pushes prices down.
Corn is facing the opposite pressure. Fewer acres will mean more competition between corn for fuel and corn for food. And corn prices affect a lot of other food prices. Corn syrup is used in many processed foods, and for animals like pigs, chickens and cows, corn is a staple.
The USDA's report looks at other grains as well. Oat plantings are expected to fall. Sorghum, too. And barley acreage could grow this year — which might affect the cost of Matt Fink's post-market beverage of choice: a cold beer.
At Billy Goat Tavern, the Cubs' opener is on TV and Fink says he's shifting his attention from acres planted to Mother Nature: "Total weather — because of the volatility based on weather, because I cannot predict weather."
Now it's up to farmers to decide if and how they'll change their plans for the year. Since most of these crops aren't in the ground yet, the report could cause some farmers to rethink what they plant in their fields.
Adriene Hill reports from Chicago Public Radio.