In recent conversations with producers, many questions have emerged about varying aspects of grain marketing and current grain prices. All these questions are top of mind for producers and the overall agriculture industry right now as they eventually lead to future buying or selling opportunities.
What’s happened
Here are a few examples of questions I’ve heard recently:
“Will this recent price rally be as good as it gets?
What if Brazil doesn’t get the needed rain?
How will U.S. elections play into grain markets?
What will the October USDA WASDE say?”
These questions are all important. Corn, soybean, and wheat futures prices seem to be at a “teeter totter” point with prices poised to either launch higher or retreat lower depending on upcoming fundamental news. The answers to the above questions will surface in the coming weeks and months as additional fundamental information is gathered.
From a marketing perspective
It seems like grain marketing gets more and more challenging as each year passes. Grain marketing has many moving parts, and you need to watch them all, balance them accordingly, and be ready with a mindset to both capture market opportunities and manage risk.
Let’s break it down with an updated synopsis of Naomi’s nine “Need to Know” grain marketing fundamentals:
Supply. Piecing together the supply puzzle will be paramount in the coming weeks and months.
How will final yield fare for U.S. crop?
Did the late August heat zap yield potential for soybeans?
Corn yields in portions of the Midwest are coming in even better than expected – is that more widespread than we thought?
Don’t forget about the global supply. Right now, trade thinks the global marketplace will have plenty of soybeans. However, wheat supplies might be trending lower around the world, as a result of adverse weather conditions.
Demand. Recent low grain prices back in late summer spurred better export demand for some U.S. commodities. That was welcome news.
Corn use for ethanol demand has been solid.
Global demand for grains seems to be resilient, which is good news, especially with supplies being viewed as ample.
The October USDA WASDE report will be out later this week, which will lay the next cornerstone for grain price movement as we begin the fourth quarter.
Weather.
Dry harvest conditions and a growing drought monitor index for large portions of the Midwest.
Hurricanes dumping feet of rain in portions of the Southeast hinders harvest.
Dry weather remains a concern in South America where extreme low river levels and drought conditions are being monitored, while hope for rain continues. Mother Nature reminds us she is still in charge. Trade and price action volatility based on every single weather forecast for South America is highly likely in the coming months.
Geo-political drama. Continuing high interest rates, fears of global recession, the war continues in Ukraine, the war persists in the Middle East, a presidential election in the United States. So much to monitor!
Remember, one negative or positive story from any of these topics could create a negative price reaction or sudden bullish price reaction. Therefore, it is paramount to have a plan in place to know when or how to price your grain, just in case one of these black swan stories emerges, sending prices into a spinning free-fall lower, or lifting a sudden rally higher.
U.S. dollar. The value of the U.S. dollar increased recently. It had been trending lower for the latter portion of summer, which was beneficial for U.S. exports. Currency fluctuations likely will continue for the remainder of 2024 as the Fed continues to fight the battle against inflation.
All you need to remember is that when the value of the U.S. dollar is down, currency exchange rates make it cheaper for other countries to import our commodities. A lower dollar increases demand for corn, soybean, and wheat exports.
China. China is important to monitor for many reasons: their economy and GDP, internal grain production, grain demand to be imported, and demand for feed for livestock.
China is also important to watch in terms of geo-political ties to the world. They continue to cast their web around the world to become a global superpower, and that can trigger volatility and tensions at any moment.
Energy markets. Crude oil futures have been hovering on both sides of $70 a barrel for a few weeks. Supplies are sufficient and demand is also strong. Keep in mind that sometimes, when the crude oil price rallies, gasoline and ethanol prices can rally as well.
If ethanol prices are rallying, then odds are that corn prices are rallying too. According to the September 2024 USDA report, U.S. farmers are expected to grow a 15.186-billion-bushel corn crop for the 2024-25 crop year. Of that, 5.45 billion bushels of corn are expected to be used for ethanol. That means, over a third of the value of corn is directly tied to energy.
The Funds. The big investment money that partakes in the trading of commodities. The fund managers also watch and monitor all of the fundamentals listed above, as they are looking for opportunities to invest and make money.
Recently the funds have been exiting their massive short grain commodity positions to show profits on the books for third quarter. They are also potentially “heading to the sidelines” ahead of U.S. elections and the other geo-political concerns listed above.
Seasonals. Seasonals are still important to monitor for grain markets.
When are grains usually the cheapest? At harvest, when supplies are plentiful.
And when are grain prices often the most attractive? Late winter, early spring or early summer, when the size and potential production of the crop is unknown.
Being aware of these seasonal time frames can help you make prudent pricing decisions for your crops.
Prepare yourself
Balancing all nine “need to knows” and being aware of how they fluctuate throughout the year will help you to best manage marketing opportunities and minimize market risks.
Re-visit these fundamentals often. Fundamental news continues to shift weekly. Be ready to act on pricing opportunities as they become available. Have action plans ready for whatever market scenario unfolds. Remember, marketing is how you get paid for your hard work. Prices can turn on a whim, be confident and ready.
Reach Naomi Blohm at 800-334-9779, on X: @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.
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