Transcripts

Farmers Hope Their Financial Crops Come In Via Corn

SUSIE GHARIB: U.S. grain markets went on a wild ride today on news American farmers plan to grow the biggest corn crop since World War II. Analysts say farmers are hoping to cash in on robust demand for corn from ethanol producers. As Diane Eastabrook reports, traders say today's news sets the stage for what could be a very volatile summer for the commodity markets.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Today's opening bell at the Chicago Board of Trade sent the grain pits into a frenzy. A government report predicted U.S. farmers will plant a lot more corn than expected this year. That sent futures prices for the crop skidding down to daily trading limits. Veteran trader Steven Bruce thinks the report cooled an overheated corn market that the ethanol industry has been fueling since last fall.

STEVEN BRUCE, INDEPENDENT TRADER: We have a lot of speculative longs in this market, a lot of new money that is basically technical traders that when line "A" crossed line "B" back in last September, they started to buy and they've been buying since.

EASTABROOK: The U.S. Department of Agriculture report says farmers intend to plant about 90 million acres of corn this spring. That's 12 million acres more than last year. But the extra corn will come at the expense of fewer soybeans. James Bower, president of Bower Trading Incorporated, says the market's response to today's report could prompt farmers to rethink their plans.

JAMES C. BOWER, PRESIDENT, BOWER TRADING: The function of the market now is clearly to try to get some more soybean makers into production, not only here in the United States this year, but we're going to have to see Brazil and Argentina kind of make up for some of the lost acreage that we're going to have here in their crop next year.

EASTABROOK: The ethanol industry is behind the corn planting boom. Industry consumption is expected to double from about 2 billion bushels this year to 4 billion bushels in 2009. Analysts like Jerry Gidel from North American Risk Management services thinks if today's about-face in corn prices continues, it could encourage even more ethanol production down the road.

JERRY GIDEL, ASSOCIATE, NORTH AMERICA RISK MANAGEMENT SERVICES, INC.: I wouldn't sense that they are going to have the kind of increase we had in the last year to 18 months, but I think there still could be another 1.5 to 2 million gallons of capacity being announced within the next 12 to 18 months.

EASTABROOK: Traders say the next 45 days will be crucial to the grain market. Corn needs to be planted by mid May. Soybeans need to be in the ground by early June. Traders say if those crops miss their planting deadlines, the markets could become even more volatile. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.