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Are cash crops, land values at critical highs?

October 2, 2011
By LARRY KERSHNER, Farm News news editor , Messenger News

Market bubble:?Trade in high volumes at prices that are considerable at variance with intrinsic values.

-Darin Newsom, senior analyst for DTN.

Commodity traders have been looking at whether there is a bubble in grain cash prices, as well as another in rising land values and, if so, if and when will they burst?

According to Darin Newson, senior analyst for DTN, when looking at corn prices over $6 per bushel, which have flirted as high as $8 earlier this summer, there is no bubble.

"It's for real,"?he said.

Brian Hoops, president of Midwest Marketing Inc., in Yankton, S.D., and a columnist for Farm News, said that compared to the old supply and demand levels, corn is overpriced.

However, he added, "prices won't return to the old $2 level any time soon."

Both analyists agree that the three-way demand of livestock feed, ethanol and exports are keeping corn and corn prices supported.

Looking at the national price, Newsom said, the basis is steadily 26 to 28 cents under the futures prices, which he said shows the market is strong.

The high prices throughout the summer have slowed demand, Newsom said, but has not destroyed it.

"Global economics and the DOW sell off added to the corn market's fall," he said, "but we needed the sell off, otherwise it would have chased demand away."

As it is, he said, there are indications that end users and commercial investors are coming back to the amrket.

Hoops agreed, saying that demand will not allow $2 corn "anytime soon," but raised questions on what will happen to the market is ethanol subsidies are lost at the end of the year.

If that happens, he said, "things could change."



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