As November begins most farmers are power washing and putting equipment back into the shop or shed for the year. This is usually a time where everyone takes a little breather from work and focuses on family, finances, budgeting, end establishing a marketing plan for the coming year.

The market also transitions from a season of intense stress as it tries to determine how each week's weather will affect yield and balance that with projected demand at a fair economic value, to a market that has a more stable environment with a known supply and demand. The imbalance of speculators to end users that drives summer volatility typically abates during the winter as the market becomes focused on moving just high enough to inspire farmer selling, followed by a price low enough to inspire end user buying. This is typically called the distribution phase of the market and is often met with a sideways or rangebound pattern.

Seasonal low established

It is likely that the $5.06 price traded on October 13th was the fall low this year. This would match up very closely to the seasonal low that normally occurs in the first week of October according to this 20-year seasonal chart.

Based on the seasonality of the market, you could expect a sideways distribution range until the market moves higher into the spring. This would make logical sense in the coming six months as history tells us to expect a significant shift away from corn acres given price of inputs. One way to resolve or prevent such a shift would be to lower fertilizer and chemical expenses. This is not likely given the fact that input prices have risen due to long term macro reasons. The tariffs placed a few years ago, the labor issues worldwide associated with Covid, and the world’s logistic issues are not easily solved. Since the industry cannot stand more than a 3-million acre shift away from corn, we believe the market will adjust to provide producers more incentive to produce corn and less incentive to produce beans or other commodities. Obviously, that argument would lean towards a higher corn price; however, it could also be accomplished by lowering other commodity prices. Therefore, your marketing plan should include both possibilities.

Profit keys for 2022

As we transition from the harvest season and into the marketing season, our consulting business has been very busy working with producers establishing budgets and determining profitability. We highly recommended buying inputs back in August. Yet getting those nitrogen units down has been a challenge for many and some product might re-price at double the values they were bought at. These are challenges that must be addressed head on.

We have also recommended protecting price on 50% of 2022 soybean with some built in open upside features in order to lock in a profit despite where prices go. This is a comfortable position and is allowing us to maintain a larger long position of corn while we let this market resolved the dilemma we see coming.

Micro issues that could move the market out of the coming distribution phase would include:

USDA supply demand table released November 9^th, weekly export shipments of corn needing to move closer to 50 mbu versus the current rate of 30, weekly soybean exports shipments needing to decline or USDA will need to raise exports,  participation by funds during the holidays, the January Annual Crop Production, Supply-Demand and Quarterly Stocks report, and of course, South American weather.

All of these micro influences are of course monitored during our weekly video broadcasts by our team of experts. We invite you to listen in or to give us a call at any time.

Reach Bill Biedermann at 815-893-7443 or [email protected].

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