Ms. Jones: Robust to say the least.
TWST: Is it because of ethanol?
Ms. Jones: Ethanol has definitely contributed to the robust demand and has drawn
much public attention, but there are a number of issues that have contributed.
Ethanol clearly drove higher corn demand, which resulted in more acreage being
planted in corn this year. Those acres were taken from primarily soybeans, but
also cotton, peanuts, etc., resulting in higher prices for those commodities.
Although soybeans were in an oversupply situation, sharply reduced acreage has
significantly tightened supply, resulting in much higher prices. Wheat has
suffered from two very poor growing years. Stocks-to-use is at historic lows on
a worldwide basis.
The US growing season was better than last year, but was still subpar.
Consequently, wheat prices have soared. However, even with wheat ranging from $8
to $9 a bushel, there hasn't been any indication of demand rationing. Export
volumes are still very strong, which I believe is attributable to inelastic
demand.
Going into the planting season, I believe there will be, for lack of a better
word, a fight for acreage. Specifically, because of new ethanol capacity coming
on next year, more corn acreage is needed, but soybeans need more acreage as
well. Further, given current prices, farmers are very likely to plant more
wheat.
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