An interesting set of circumstances is setting up for grain markets and future prices in 2010, said a Texas AgriLife Extension Service economist.

As economic recovery continues, Dr. Mark Welch said , more money is flowing into commodities, which is a positive for grain markets.

“People are buying commodities as a hedge against inflation,” Welch said. “There’s a lot of money coming in since March, especially a lot of index fund activity."

Welch gave a grain market outlook at the recent 2009 Texas Plant Protection Association Conference at the Brazos Center in Bryan.

One of the key factors to watch heading into 2010 is the soybean market, Welch said. Record planting in South America could lead to a bumper soybean crop, which will “lessen supply concerns worldwide," even with growing demand.

“We could see a significant increase in corn acres here in the U.S. as a result of a large soybean crop in South America,” Welch said. “If it’s short, the markets will try to buy acres in the U.S. corn belt. That will be a positive for grain prices.”

Meanwhile, favorable conditions are shaping up for the price of fertilizer. Welch said anhydrous ammonia was around $680 a ton last spring with a forecast pricing model of $430 a ton in the spring of 2010.

“That will be the cheapest since 2005,” he said. “That will encourage more farmers to plant corn. Higher fertilizer prices generally will make planting soybeans more attractive; lower fertilizer prices increase the net returns from corn. If the price of nitrogen fertilizer stays at the spring-projected prices, we could be looking at a very large corn crop in 2010.”

With increasing demand for corn, Welch sees a positive outlook for corn prices heading into the new year.

“Corn, I think, is going to be strong since we’ve got high demand from both feed and fuel," he said. “Wheat demand is flat; soybeans are the big question. We’ll have enough if South America comes through. But if China continues to import soybeans and we have a short crop in South America, it could get really interesting. Rice carryover stocks are tight again as well.”

A shortfall in monsoon rains in India this past summer has raised speculation that they could move to import rice, Welch said.

“If that occurs, it will add demand pressure to an already tight supply situation, and the price response could be significant.”

To receive Welch’s market newsletter, e-mail him at jmwelch@ag.tamu.edu. For more information about the Texas Plant Protection Association, visit http://tppa.tamu.edu.