By DOUG GRAVES
Ohio Correspondent

ST. LOUIS, Mo. — The “meltdown” affecting world financial markets has had an impact on the corn and soybean markets, too.
According to Marty Foreman, senior economist with Doane Advisory Services in St. Louis, “that’s good news for livestock producers, but bad news for corn and soybean growers.”

“As long as these financial markets are under pressure, the commodity markets will remain under pressure,” Foreman said.
According to Foreman, corn for December delivery settled at $4.17 on the Chicago Board of Trade early last week. That is $3.70 off the contract high of $7.87 set on June 27. Soybeans for November delivery settled at $9.26 the same day, which was $7.1075 off the contract high set on July 3.

“The market has been in decline since the first of July once we got past the flooding issues (in the Midwest) and the acreage reports for corn, which were higher than expected,” Foreman said. “And, the weather since that time has generally been favorable for crop production.

“The liquidation really accelerated once we got into the financial meltdown, especially the last two weeks. Corn prices are down roughly $1.50 a bushel in the last four weeks.”

Harwood Schaffer, senior policy analyst with the Agriculture Policy Analysis Center in Tennessee, sees farmers faced with difficulties even in the near future.

“The Financial meltdown will hit such that farmers will have to finance their inputs,” Schaffer said.

“The local banks aren’t as tight as some of the big boys. Harvest financing will be tougher, and we still don’t know how tight things will be. Some of it will depend on how well the prices hold up through harvest and what kind of cash situation the farmers have going into next year. The meltdown for farmers is dependent on the financing of next year’s inputs.

“If farmers are self-financing, and the prices stay up, they’re not in any trouble. If they’re dependent upon financing for inputs going into next year, they may find money is harder to get. And they may be paying higher interest rates than they’re used to.”

According to Schaffer, the markets for corn and soybeans have taken a hit since Oct. 6. Recently, the markets have been running sideways.

“These markets are waiting to see what happens with this year’s harvest and whether or not the Western Corn Belt has as much corn as the USDA thinks. If there’s less corn, we’ll see some upward pressure on prices as cotton, corn, soybeans and wheat compete for acres. If the crop comes in as projected, it’ll reduce the pressure on prices.

“There is no quick solutions, nor is there a single solution. It will take a while for things to be resolved.”

And there’s also concerns about rent agreements. Stephen Foster, OSU Extension Specialist in Darke County, Ohio, has received numerous calls from landowners wanting to know what the average land rent price will be in his county.

“Most rent agreements are based on an expected yield per acre and price per bushel at the time of harvest,” Foster said.
“As prices rose last year to near record levels, many landowners raised their rent prices to capture the increase in crop values.
However, with the recent drop in commodity prices - and the increase in input prices such as seed, fertilizer and chemicals - many crop producers may be faced with negative financial profits next year.”

All three agree on one thing: the grain markets are volatile, and farmers are assuming the increased risks associated with the volatility.