The grain market’s big run-up has captured all the headlines. But no one knows for sure which way this market will go next.
That’s why we’re looking forward to dissecting the market’s next moves at the Farm Futures Business Summit, and you’re invited. The summit will be held in person June 16-17 at Coralville, Iowa.
Led by This Week in Agribusiness host Max Armstrong, a panel of market analysts will review market fundamentals and discuss where prices may be headed this summer. This is a Q&A open forum, so come ready to get your marketing questions asked and answered!
Anatomy of a rally
In the last year USDA made historic revisions to its balance sheet, suggesting that previous production and demand estimates missed the mark. Prior to these revisions, the futures market remained soft as computers traded headlines and farmers sold too cheap, while the private industry was shouting that USDA was way off.
Now, who should traders believe? What is fake news and what is real? Those are questions that will be sorted out at the summit with panelists Bill Biedermann of AgMarket.Net, Drew Moore with Advance Trading, Inc., and Darren Frye with Water Street Solutions.
According to Biedermann, the answer will come down to two factors: the actual increase in U.S. production this year, and how much will weather impact available supplies once 2021 acreage is known.
“If there is a real identifiable growing concern, then the sky is the limit as fear-driven buying runs alongside inflation justification,” Biedermann says. “If acreage is greater than expected, then the only way to get a rally going is to ‘show me’ the damage” from weather.
Deliveries could also become an issue; however, at this time, it appears the main participants of the market are moving their position out of July deliverable futures.
Repeat of 2012?
Looking back, the largest new-crop corn exports booked in late May to early June was in 2012, with about 230 million bushels. “By late May this year, we were in excess of 600 million bushels,” Moore says. “This certainly sets the stage for another demand-driven market next year, but the big question mark is supply.”
What if USDA’s weekly reports show a high percent of good-to-excellent corn crop ratings? That would likely keep December corn within the $5-to-$6 range until more is known about U.S. production, Moore says. Where does it leave us for the rest of the summer?
“Ten dollar corn all the way down to $3.50 corn is not out of the question over the next six months,” Moore says. “It all simply depends on supply, with questions surrounding larger corn acreage.”
New demand opportunities
Demand-led bull markets are difficult to end quickly. China has a huge appetite, and there seems to be evidence it will continue to buy feed grains out into 2024, Frye says.
“Coming off COVID has created unique opportunities that people have missed on the demand side,” he says. “People got too bearish, and they have been fighting that since last summer instead of switching their mindset. I don’t think we will resolve this in 2021 because we need big yields and demand to slow down. I don’t see either one as a high probability.”
Funds can get more active. The federal government continues a spending policy to stimulate the U.S. economy. Inflation is on the horizon and so are higher interest rates.
“I am still friendly at these levels because I don’t see demand rationing yet,” Frye adds.
For now, the bulls are in control, meaning the U.S. farmer needs to deliver a record national yield to temper volatility.
Want to hear more?
At the summit market panel discussion, you’ll hear more insight on where grain price is headed and how to make sure you can protect margins that we have not witnessed in over eight years.
To register yourself and others from your farm operation, go to farmfuturessummit.com and lock in your hotel room at the Coralville Marriott Hotel and Conference Center. See you June 16-17!