A32—Lancaster Farming, Friday, July 3,1981
Marketing expert predicts
LANCASTER - More than 100
southeastern Pennsylvania
agriculture business leaders
gathered here at the Treadway Inn
Tuesday evening for the annual
Penn Ag grain meeting. According
to Penn Ag President Morris
Brown, the meeting is customarily
held at the start of the grain
harvest in the state.
Speaking about futures and
grain markets to the gathering was
Daniel G. Amstutz, general part
ner of Golman, Sachs & Co. in New
York. He enlightened the group on
the constancy of change in the
grain business.
Citing the current weather
changes being experienced by
Cornbelt farmers in the past three
months, Amstutz called the ag
leaders’ attentions to a front page
story in the New York Times which
reported on the heavy rainfalls
“following on the heels of drought”
in the Midwest. This weather has
created a vast uncertainty in grain
forecasts.
Looking to the USDA estimates
for grain production figures for
this year as a measure of things to
come, Amstutz quoted the world
forecast at 1,636,000,000 tons of
grain waiting to be harvested. This
figure is up 4.6 percent over last
year. Of the 71 million ton in
crease, 46 million tons will come
from the predicted increase in U.S.
grain production, he pointed out.
Amstutz linked this production
with a greater carry over in wheat
and coarse grain reserves.
Since all eyes are looking to the
U.S.S.R. and future U.S. grain
deals, Amstutz reviewed the USDA
prediction that the U.S.S.R. will be
importing 33.5 million tons of grain
this year and 35 million tons next
year to “add to their reserves.”
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Their 1981 harvest is predicted to
be 210 million tons larger than
their harvest a year ago.
However, Amstutz questioned
the accuracy of this optimistic
forecast for increased Russian
grain imports. “Their history is
not to import to increase their
reserves,” he stated.
The marketing expert explained
the Russians buy most of their
grain (22 million tons) from
Canada, Argentina, and Australia.
He predicted U.S. exports of gram
to the U.S.S.R. “will not be lower
than 8 million, but they won’t be
much more than 2 to 4 million ton
over that.”
“The Soviets are good traders,
buyers, and planners,” he said,
noting the outlook was not positive
for substantial increases in exports
to the U.S.S.R.
The Chinese will not be buying
much more U.S. grain, Amstutz
predicted, since their harvest is
forecast to be more than 7 million
tons greater than last year during
which they imported 15 million
tons of grain. He stated the import
figure for China would fall
somewhere in the 13 million ton
range this year.
As far as the U.S. price outlook
appears, Amstutz said it’s “clear”
“low prices seem to be in
dicated.”
“By 1982, corn will be below $3,
soybeans will drop below $7, and
wheat will go below $4,” Amstutz
predicted, “perhaps significantly
below.”
He advised the ag business
leaders to remember;
the law of supply and demand
is real;
that momentum is real, with a
force and strength of its own;
that momentum never lasts
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forever;
not to rely on the accuracy of
government forecasts; and
things don’t get as bad as the
doom say’ers predict or as good as
the folks wearing rose-colored
glasses say.
He philosophized there is “no
such thing as a little too much or a
little too little.”
"When there’s too little, usage is
rationed by economics and the
weakest financial user. When
there’s too much, usage falls to the
base support levels." he said.
“The challenge of the world is to
feed itself,” Amstutz stated. “The
burden is on U.S. agriculture
supply adequacy is the problem,
not inadequacy.”
“Markets don’t care about
tomorrow but today, especially
when you’re dealing with a living
commodity,” he added. “The way
markets work, prices respond to
demand.”
The futures expert recom
mended business leaders “try to
look for a counterveiling factor
when the momentum in the grain
market is down” that will change
the price trends, such as the
weather.
“It’s worth watching those
spring sown crops here and
elsewhere in the world,” he said,,
observing the market is more
bullish when there is bad weather
news and more bearish with good
weather reports.
Other factors that can influence
the grain market, he said, include
sudden government actions, world
peace, and interest rates.
“Government surprises tend to
have a more bullish effect than
bearish,” Amstutzsaid.
Concerning interest rates, the
market forecaster predicted rates
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Penn Ag President Morris Brown, right, reviews the
Monday grain meeting agenda with speaker Daniel Amstutz.
to be down to 14-15 percent by
summer. However, he suggested
these rates only will have a short
term effect on prices since grain
and food are relatively inelastic.
Amstutz concluded by repeating
his prediction for low prices this
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year in the grain business, noting
prices are “a lot closer to the down
side than the upside potential.”
“Agriculture has the most
growth potential of any industry
today,” he said in closing. “We
must think on the good side.”—SM