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What’s keeping grain markets in a holding pattern?

The longer a market trades in a sideways pattern, the bigger the price breakout down the road.

Naomi Blohm, senior market adviser

October 7, 2021

5 Min Read
World map with charts and graphs as symbols of global finance

Harvest pace is progressing quickly across most of the Midwest thanks to nearly ideal weather. And while another week has passed, grain prices continue to remain range bound.

I feel like a broken record when discussing and referring to grain price patterns. “We are likely to be stuck in a sideways trading range,” is something that I have been saying repeatedly for over a month.

And once again, it does appear for the short term, corn, soybeans and wheat futures will likely trade in a tepid pattern, as supply and demand factors remain hazy.

The known and unknown

There is an average sized (in terms of trendline yield) U.S. crop out there being harvested, and that will be old news from now until Thanksgiving.

Since early yield results are not coming in overly small, nor at a record, supplies of wheat, corn and soybeans within the U.S. will likely be deemed to be sufficient by traders in the short term. This notion has pushed corn and soybean prices down to major technical support levels on charts.

Yet, the market remains well supported at these current levels thanks to a mix of unknowns.

The unknowns of the market hinge around demand. Exports sales are modest – will they pick up? Demand for biofuels seems to be holding steady, supported by higher crude oil, heating oil and gasoline futures. Feed demand remains strong with plenty of calls coming in from livestock producers questioning how aggressive to be on purchasing additional feed needs right now at harvest. Because of this mix of known and unknown, prices seem poised to hold steady for the moment.

Yet just remember, the longer a market trades in a sideways pattern, the bigger the price breakout down the road. 

Mixed headlines

Additional unknowns stem from outside market influence; higher energy prices, uncertainty about the U.S. debt ceiling, articles threatening that if a potential U.S. economic recession should occur, it would be worse than 2008. Global covid-19 economic recovery efforts, fluctuating currencies, supply chain disruptions. The outside market noise is loud.

The Biden administration is attempting fresh negotiation talks with China. Obviously, the trade deals are of particular importance, but equally as import is the value of the U.S. Dollar. Remember, when our U.S. Dollar is lower, it makes it cheaper for other countries to import our products, thus improving U.S. export demand. The dollar has been steadily climbing higher since May, as the Greenback has been viewed as a safe haven amongst global strife.

Continue to keep an eye on crude oil. On Wednesday this week, crude oil futures posted a bearish reversal on daily charts after testing near the $80.00 major resistance levels. The market remains supported by strong demand and lower production (from previous years), yet a technical correction for the short term seems likely. If demand remains strong and supplies limited, any setback may be viewed by traders as an opportunity to buy.

Don’t be lulled by quiet grain markets

Finally, when a market consolidates, or trades sideways, that means the current supply and demand tables are known for now, and outside markets may tip the scales one way or another. When will this price breakout that I’ve been writing about finally occur?

For your sake, because you’re in the middle of harvest, I hope that the breakout can wait until November when you have harvest mostly wrapped up. Then in the “off season” use those quiet moments to focus on your marketing strategies for the months to come. Map out what your plan of action will be if prices start to work higher. Ask yourself these four questions:

  • Where will you make cash sales?

  • What steps will you take to protect unpriced bushels?

  • Which outside market news events could capitulate the market?

  • What is your plan if South America ends up having weather issues?

In a time where so much can change and affect the market price quite quickly, it’s more pertinent than ever to have a plan in place and be prepared. Stick to your plan, or hire someone who can help make those decisions with you.

Remember, marketing is how you get paid for all your hard work! It’s what separates the best from the rest. If you do not feel that you can make the time for marketing, or feel you are not disciplined enough to pull the trigger when you “know” you should, or if you need a little education to help you along the way, feel free to give me a call or send me an email.  I would be honored to assist!

Reach Naomi Blohm: 800-334-9779, [email protected] and Twitter: @naomiblohm

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. 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. 

About the Author(s)

Naomi Blohm

senior market adviser, Total Farm Marketing by Stewart Peterson

Naomi specializes at helping farmers understand how to manage cash marketing needs and understand the importance of managing basis, delivery point considerations, cash flow needs and storage capacity. She earned her Bachelor of Arts in Political Science with a minor in Agriculture Business at the University of Wisconsin in Platteville. She has a Master of Science in Adult Education with an emphasis in Ag Economics from the UW-Platteville and a Master Certificate in Global Education, from the UW-Oshkosh.

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