“There are predictions of a continuation of the drought, and conversely there are those who say we’ll have more normal weather. The market and traders will be watching this very closely.

“Central and southern Illinois, and central and southern Indiana, which are key corn and soybean-producing areas are very, very deficit in subsoil moisture. They bore the brunt of last year’s drought, and have not had replacement moisture at levels needed to get back to normal. This doesn’t mean they can’t still make a good corn or soybean crop — it just means that timing of rainfall will be much more important as we go through the growing season.”

In the 1990s, Glidewell says, “We were in a situation where one big crop could mean surpluses and several years of poor prices. Now, that balance has changed on a worldwide basis.

“As the economies of India and China have improved, demand for protein has increased substantially, which has driven demand for basic ag commodities to the point we can’t afford to have a significant shortfall in production of any of the major staple grain crops for any length of time.

“And if there is a shortfall, there will have to be price appreciation to try and attract those bushels or tons back into production.”

Surpluses aren’t necessarily bad, Glidewell says. “In the past, they were burdensome and often kept prices down for years, adversely affecting producers and the economies that depended on those producers.

“But today, we have to be concerned about price volatility, prices exploding due to shortages, which wreaks havoc with demand. And demand destruction from high prices is something you don’t overcome right away.

“If a cattle farmer goes out of business because of high feed prices, he may not come back into business. Someone else may take over that land and raise cattle on it when prices improve — but demand destruction from high prices can be a long-lasting situation.”

It’s very important, Glidewell says, to have a stable supply of the major commodities. “The demand basis worldwide is such that we can’t afford to shift too far to one crop or another without having an adverse impact on other commodities.

“Weather has become a much more volatile market fundamental in today’s environment, by causing significant shifts in key production areas. The Black Sea region, for example, has become a major grain exporting region of the world. This is a somewhat arid region of Ukraine and southern Russia, and if they miss needed rain, the wheat crop slips, and it has a significant impact on grain prices.

“Ukraine and Romania have become new sources of production, which is being brought on by their transition to more market-based economies, and of course it also has been driven by higher grain prices.”

hbrandon@farmpress.com