McHENRY, Ill. — The recent rollercoaster of U.S. stocks shouldn’t cause lasting concern for the country’s grain commodity markets, according to an analyst with Allendale, Inc.

The Dow Jones Industrial Average plunged 588 points Aug. 24. It rebounded two days later to finish 619 points higher, a rally which ended six straight days of losses. The Dow dipped about 12 points at the close of trading Friday.

An economic slowdown in China and concerns over a possible interest rate hike by the U.S. Federal Reserve are two factors listed by analysts as reasons for the market turmoil.

“This is not a 2007-2009 break in the economy, mainly because the U.S. economy is still showing general – extremely anemic, but general – growth right now,” said Rich Nelson, Allendale’s chief analyst. “Nobody is calling for any major sharp decline in the GDP (gross domestic product) or employment.

“We feel, in general, grains will be able to do just fine, especially as fundamentals for grains will begin to improve as far as the new-crop picture, once USDA recognizes moderately lower yields in coming reports.”

Market watchers are wondering how recent stock volatility and the state of the economy in general will impact commodities, he said. To answer the question, Nelson compared historic and current corn, soybean and wheat prices to the CRB Index, a listing of 19 commodities. The CRB Index, which has seen an almost steady decline over the past year, includes corn, soybeans and wheat.

A correlation exists between the highs and lows of the index and of commodity prices, he noted, but it’s not terribly strong.

The key point of grain fundamentals is that supply and demand drive prices, and that idea is crucial to understanding what may – or  may not – be an influence in commodity prices, Nelson said.

“In general, the moves (in the CRB and commodity prices) do follow each other but it’s certainly not something to trade grains on,” he explained. “Grains do have a very specific and clear pricing mechanism, which does account for outside market issues but is mostly made up of grain fundamentals.

“There is that correlation with outside commodities, but it’s kind of loose. We are not going to use this big move in terms of the CRB right now to change our price outlook for grains.”

Nelson spoke Aug. 25 during Allendale’s “Ag Leaders” monthly webinar series. Through that day, the Dow was down 11.4 percent for the month, something Nelson said isn’t unusual for the market. For example, in October 1987, the Dow declined 23.2 percent and in August 1998, it was down 15.1 percent. “This is not a big, surprising scary market moving event for the big-picture issues compared with history,” he said. “We’ve had several months with double-digit drops. We’ve been here before. Markets are supposed to decline. A healthy market does have declines. It is scary for us right now, but we’ve done this many times before.”

In addition to some growth in the GDP, employment numbers, while not great, are showing positive returns, Nelson said. “The Consumer Confidence Index (for August) showed a jump from the month of July of 91 up to 101.5 for August. Those are very strong numbers. “I’m not a major bull in terms of the economy but I’m simply pointing out, for this current stock market scare, it’s not backed up by weak U.S. economic signals. We may not see as much liquidation, if any, out of grains.”

Larry DeBoer, a professor of agricultural economics at Purdue University, expects the economy to grow at a slow but steady rate over the next year. Since the end of the Great Recession, annual growth has stayed in a range from 1.5-3 percent.

It’s uncertain if interest rates will rise. “The Federal Reserve has held its federal funds interest rate near zero since the end of 2008,” DeBoer said. “They’ve been hinting that they’ll raise the rate soon. Still, with growth slow, inflation low and the dollar’s exchange value rising, they’ll probably be cautious.”

As for China’s changing economic story, Nelson said the country could see a decline from the 7 percent growth reported in the second quarter to rates closer to 4 or 5 percent.

“In the stock market world, as far as their expectations, those are tremendously large declines,” he said.

“In our world, that’s still incredibly good growth for a tremendously opportunistic country.”

Allendale won’t change its numbers for soybean imports by China because there’s not a strong correlation between specific imports of beans and the Chinese economy, he explained.