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5 grain market factors to monitor in the coming weeks
Ag Marketing IQ: The recent heat wave is just one impact on the markets. There’s much more for you to keep an eye on.
5 Min Read
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The grain markets continue to ebb and flow on each news headline and weather forecast. While it’s tempting to focus all your attention on guessing potential yield loss impact with this recent heat, please continue to monitor multiple factors for the grain markets.
What’s happened
When looking at the corn, soybean and wheat markets, the world is still dealing with tight supplies of old crop ending stocks. Yet, as harvest approaches, there are hopes of record production by the United States and other Northern Hemisphere countries to help increase global new crop supplies. The hope of larger supplies has been weighing on new crop futures recently.
From marketing perspective
When looking at the big pictures, here are five factors to monitor for the grain markets during the coming weeks. We’ll know soon enough if yields will be larger or smaller than anticipated, due to stubborn early summer heat.
U.S. economy. Later this week all eyes will be on Federal Reserve Chairman Jerome Powell when he speaks at the central bank’s annual economic meeting in Jackson Hole, Wyoming. The hope among traders is that Powell may indicate the Fed is done hiking interest rates and may even begin to signal cutting rates during 2024. However, strong reports on the economy recently may have hurt such hopes.
Seasonals. As I discussed in last week’s blog, seasonally, December corn futures have a tendency to find a price low sometime in late August or early September. Keep in mind past performance is not indicative of future results. Yet, looking back at the past decade, 10 out of 10 years, December corn futures have found a “harvest low” and then subsequent price rally. The average rally over the past decade has been 64 cents!
Early harvest yields. Combines will be rolling soon enough. With as variable as summer temperatures and rainfall amounts were, yields will likely be inconsistent. Tip back on corn ears was a hot topic this summer on social media. Soybeans had decent rain and cooler temperatures to start the month of August during the critical pod filling stage, but will the late August heat become a detrimental factor to soybean yields?
Geo-politics. There are plenty of geo-political aspects to be watching closely right now.
For starters, the world continues to focus on China’s slower than expected economic rebound. This is weighing on market sentiment. The notion is that if China’s economy is doing poorly, then potentially its citizens may not be in the mood to spend money, especially on things tied to commodities.
Next, we need to continue monitoring the Russian-Ukraine war and how the world responds to the ongoing war. Do global leaders step up and take a stand? Will the European Union leaders continue to work together to help get grain out of Ukraine and to the places that need it? Because of the war, will China shift their buying pattern? They had been buying Ukrainian corn, will that shift to the United States?
Lastly, China and Russia are said to be pushing to expand membership in the “BRICS” (Brazil, Russia, India, China and South Africa) bloc of emerging economies to counterbalance Western influence. Chinese President Xi Jinping has been promoting the expansion of BRICS to enlarge the bloc since 2017. Keep in mind, the BRICS nations now account for more than a quarter of the global economy and nearly 40% of the world's population.
September 12 WASDE report. Traders will primarily be eyeing any changes in yield and ending stocks in that report. The focus will be on new crop demand. Will there be additional reductions in corn export demand? Will USDA increase demand for U.S. soybean crush? Will USDA tweak any global production numbers? In some years, the September WASDE report helps to solidify a “harvest low” for the grain markets. Will that be the case for this year?
Prepare yourself
These are factors that could have an enormous impact on prices until the end of 2023. Therefore, get your marketing plan ready. Will record crops take place this year or will weather, politics and reports change things? Only time will tell. Have a plan in place, and together, we’ll see what awaits in the coming weeks.
Reach Naomi Blohm at 800-334-9779, on Twitter: @naomiblohm, and at [email protected].
Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.
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