Transcripts

The Crop Report Harvests Good News For The Agriculture Markets

PAUL KANGAS: Jittery agriculture markets got some calming news today from the U.S. Department of Agriculture. The government's monthly crop report said the recent floods in the Midwest damaged fewer acres of corn than some experts had projected. But as Diane Eastabrook reports, many grain analysts are questioning the numbers.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: At the opening bell this morning at the Chicago Board of Trade, corn futures prices tanked in a fast market on better than expected news about the crop and inventories. The U.S. Department of Agriculture said farmers planted a little more than 87 million acres of corn this spring. That is about 7 percent fewer acres than last year, but an improvement over what analysts were forecasting. The amount of grain stored in elevators was also better than expected. Newedge U.S.A. grain analyst Dan Cekander says the inventory number shows that corn buying has slowed because it's too expensive.

DAN CEKANDER, GRAIN ANALYST, NEWEDGE USA: It just tells you that demand rationing had begun during the March-May period on the feed side, so the livestock producers had slowed down their rate of corn feed.

EASTABROOK: Flooding throughout the Midwest has pushed corn prices towards $8 a bushel in the last week on fears that up to three million acres of farmland may be under water. But after surveying farmers last week, the U.S.D A. said the lost acreage may be about half that amount. Still, James Bower, president of Bower Trading, is skeptical of the government survey. Bower points out that only 1,200 farmers were polled and he thinks some information provided might be inaccurate.

JAMES BOWER, PRESIDENT, BOWER TRADING: Some of the people probably are stressed out trying to get their crops in, trying to take care of flood damage. They're trying to look at issues as far as getting seed. I mean, there are a lot of things that happened right in that timeframe which put that producer and that person being surveyed under stress.

EASTABROOK: Bower also cautions that the U.S. corn crop is so fragile now from the cold, wet spring that a hot, dry summer could cut yields this fall.

BOWER: We have not gotten to the most critical part of the growing season, which will be July and August and as shallow-rooted as this crop is, I think the story in food and food prices is not over yet.

EASTABROOK: Analysts say August U.S.D.A. crop report will probably give traders a more accurate view of how much grain farmers will harvest this fall, so that could keep these markets volatile until then. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.