Grain prices hinge on weather Meet a farmer who doesn't want a bumper harvest

Food

May 04, 1998|By KNIGHT RIDDER/TRIBUNE

CHICAGO -- At spring planting, grain traders trade on the weather -- the spring rain, summer drought and, this year, El Nino.

Unusual weather has captivated the grain trade, launching a thousand predictions of a parched and sizzling summer, with skyrocketing grain prices. There are contradictory predictions of mild growing season and sagging prices. A lot of money will be made or lost depending on which comes true.

"Everybody is concerned with what might happen, because after El Nino you can get a hot, dry summer in the United States," said Victor Lespinasse of A. G. Edwards & Sons. What dominates the Chicago Board of Trade, which determines grain prices for the nation, is "weather, weather, weather," he said.

Farming always has been risky. The classic dilemma for farmers is that bad weather means high prices, but not much crop to sell, while good weather can mean plenty to sell but low prices. This year's sharp swings in weather, coupled with a new, largely untested farm program, have increased the risks.

An unusually wet spring has delayed spring planting in much of the nation. At the Maroa Farmers Co-op in central Illinois, manager Jay Whalen peered outside at another damp, chilly day.

"My farmers have only got about 150 acres in the ground," he said recently -- less than 1 percent of the area's corn. "This time of the year, you hear who's planting."

The U.S. Department of Agriculture sees plenty of mud, too. Douglas LeComte is chief of its agricultural weather section, which issues the Farmer Drought Index.

"We really should rename it the Farmer Wetness Index," LeComte said. "That's the first order of business, to dry things down."

Blame El Nino. The warm spot over the Pacific Ocean is credited with altering weather around the globe. For much of the United States, that's brought rain. Spring rains are no reason for farmers to panic. But forecasters do worry.

In years past, notably in 1983 and 1988, El Nino's rapid warming was followed by rapid cooling, launching a severe midsummer drought that fried crops across the South and the Corn Belt.

"I've been telling people that there are a lot of similarities to

1983, the other great El Nino we've had this century," LeComte said. That year "was very wet in the spring, and then things just suddenly turned around and got very hot."

Nobody knows yet if 1998 will be a replay -- and LeComte is making no prediction -- but the mere possibility has them buzzing in Chicago. Lespinasse's trading desk is covered with weather forecasts, while overhead, giant screens flash weather maps of North and South America.

"This severe El Nino raises the uncertainty," he said.

If the weather patterns seem similar to those of 1983, farming is much different. Back then, the country was awash with surplus grain, which cushioned the spikes in grain prices, meat prices and food prices. Even with that, soybean prices nearly doubled.

Today's grain stockpile is much smaller and the government's old safety net for farmers has been replaced by a newer and thinner model untested by hard times.

For farmer Phil Simpson, who grows corn and soybeans near Springfield, the fear isn't of a dry summer. He worries that good weather that will bring a bumper harvest nationwide, and flatten corn prices to ruinous levels.

Already, corn is selling at $2.50 a bushel, and falling. "Nobody can believe that corn prices have gone this low," Simpson said. "I'm just hoping El Nino gives me a wicked summer and gives me only half a crop."

The return of low grain prices has renewed old fears. The past three seasons were excellent for many farmers. For a while, it looked as if American agriculture was finally escaping the gloom of the 1980s and heading into an era of prosperity. Land prices climbed. Exports boomed. Farmer debt fell. In 1996 Congress granted new planting freedoms, with less government protection.

Then, last fall, the Asian economic crisis hit. Grain prices have marched steadily downward for the last six months.

"Farmers are getting a little grumpy," said Dale Durchholz, a market analyst at the Illinois Farm Bureau. "They're getting a little anxious about the things that are happening there, and they all know they're operating without much of a safety net under them."

Across the country, U.S. farmers will raise something like 9 billion bushels of corn this year -- enough for all the United States, with plenty left over to sell abroad -- and more than 2 billion bushels apiece of soybeans and wheat, America's No. 2 and No. 3 crops.

And in Chicago, traders in weird-colored jackets, worn to be noticed in the frenzied grain trading pits, will keep buying and selling grain, with a close eye on El Nino.

"The sooner and quicker it dissipates, the greater the expectation of a hot and dry summer," said Lespinasse, wearing barn-red vest. "This market's going to go higher, no matter what, if we have a hot, dry summer."

Pub Date: 5/04/98

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