In recent conversations with producers, many questions emerge about varying aspects of grain marketing. Here are the top three:

What’s happened

All these questions are important. Many are top of mind for producers and the overall agriculture industry right now as the answers ultimately lead to buying or selling opportunities.

Unfortunately, those answers aren’t available for at least another few weeks – and potentially a few months as we learn more about South American weather and production.

In the meantime, there are many aspects of grain marketing to monitor besides weather and USDA reports. You need to be aware of many other price components tied to the grain market, so you can be ready to capture market opportunities and manage risk.

From a marketing perspective

Let’s break it down with an updated synopsis of Naomi’s Nine Need-to-Know grain marketing fundamentals.

Supply

After two years of bull markets, grain prices are back in a lower lull of price activity. The threat of lower global food supply has subsided for now. Yet, global supplies of grain are neither record nor robust. However, since the initial shock of the Ukraine and Russia war, global supplies of grain are deemed sufficient, for now.

Related:India: The new global commodity powerhouse?

Weather in South America in the coming weeks will continue to be scrutinized due to parched soils in Central Brazil. Trade is also keenly aware of the dryer conditions occurring in the United States Midwest.

The USDA WASDE report on January 12 will provide an update on both U.S. and global production of grain. Will they make the U.S. crop size larger? Will they reduce the Brazil soybean crop? This report is often dubbed, “the big one” and can provide many surprises.

Demand

Overall global demand for corn, soybeans and wheat is hearty. Demand will be monitored and scrutinized on the January 12 USDA report in terms of corn demand for ethanol, demand for grain exports, any increase in demand for soybeans for use in the crush, and potentially an increase in wheat demand for exports due to China’s early December purchases.

Other aspects to watch include an increase in Chinese domestic demand for soybeans. Also, keep an eye on India, and any improvements noted in that country’s demand for wheat, rice or soy products.

Weather

Brazil is the country being monitored the most right now in terms of weather and potential grain production. A large crop there for both corn and soybeans would seal the deal for larger global carryout of those grains and keep a lid on prices. A smaller than expected crop would allow for hope for a price increase in the coming weeks and months.

Of course, we are monitoring the weather in South America right now. But also important to watch this winter will be weather in Russia, Ukraine, Europe, and North America in terms of how that could affect winter wheat.

Geo-political drama

The ongoing Russia/Ukraine war, Middle East turmoil, China, North Korea, Iran picking fights, potential trade wars or upcoming global elections. All of these are the headlines to watch for potential “black swans.”

Remember, one unexpected headline from any of these topics could create a major price reaction. If one of these black swan stories emerges to send prices into a spinning free-fall lower or surprise rally higher, it is paramount to have a plan in place to know when or how to price your grain.

U.S. dollar

The value of the U.S. dollar has been in a slow uptrend for a decade. Now with signs that the Feds will likely lower interest rates in the latter part of 2024, the U.S. dollar has been slipping slightly lower.

Will that continue? All you need to remember is that when the value of the U.S. dollar is down, it makes it cheaper for other countries to import our commodities due to currency exchange rates. A lower dollar increases demand for corn, soybean and wheat exports.

China and India

China and India are important to monitor for many reasons: their economy and GDP, internal grain production (as the world’s largest growers of wheat and rice), grain demand for domestic use, and demand for feed for livestock.

Thanks to a decade of overall growth in the economies of both India and China, their middle-class population is expanding and has more disposable income. Because of this increase in income, food consumption for higher protein – including dairy, poultry and pork – also has increased.

Energy markets

Crude oil futures have been hovering between $70 and $80 a barrel for many weeks. Supplies are sufficient and demand also is strong. Keep in mind that when the crude oil price rallies, gasoline and ethanol prices sometimes can rally as well. If ethanol prices are rallying, then odds are, corn prices are rallying, too.

According to the most recent USDA report, U.S. farmers grew a 15.234-billion-bushel corn crop, and 5.32 billion bushels of corn were used for ethanol. That means, over a third of the value of corn is directly tied to energy.

Funds

As in, The Funds. The big investment money that partakes in the trading of commodities. The fund managers also watch and monitor all the fundamentals listed above, as they are looking for opportunities to invest and make money. Every week, the government requires the funds to disclose the amount of positions bought or sold during the week. From there, we can track if they are amassing a long position in the market, or a short position.

As of this writing, the funds are keenly aware of the overall market sentiment for grains and they will closely watch the January 12 USDA numbers. The funds also are monitoring the Fed for any additional signs of a drop in interest rates.

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 smart pricing decisions for your crops.

Prepare yourself

Balancing the nine need-to-knows and being aware of how they fluctuate throughout the year will help you best manage marketing opportunities and minimize market risks. While we all continue to anxiously await the January 12 USDA report to find out final U.S. production numbers, global crop production estimates, and current demand, the other fundamentals need to be constantly monitored as well.

Revisit 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. Prices can turn on a whim, be confident and ready.

Reach Naomi Blohm at 800-334-9779, on X (previously Twitter): @naomiblohm, and at [email protected].

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