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China’s impact on February corn, soybean rally

Grain markets begin a delicate dance between seasonal price tendencies and potential Chinese purchases.

With the February USDA report now out of the way, the next potential market-moving event stems around the important Feb. 15, 2020,Phase One trade deal date.

It is on that date that any agricultural commodities purchased by China will “count” toward the country’s agreed purchase goals as stated in the Phase One document verbiage.

Some have wondered if China has been waiting for this date to occur before beginning their potential commodity buying spree. If China makes any substantial purchases next week, the futures market will respond in kind, pushing prices higher. Please be aware that if no purchases develop next week, it might take the wind out of the sales for futures prices for the short term. 

1. Seasonals

Corn and soybean futures both have a strong seasonal tendency to trade higher during the month of February. Take note that for both commodities, the five-year pattern suggests that February rallies run out of steam at mid-month, while the 15-year pattern suggests that a rally might occur into month end.  Whatever type of price rally occurs, history and seasonals strongly suggest that prices then decline lower throughout the month of March and into April.

021320blohm May Corn Seasonal.JPG

021320blohm may soybean seasonal.JPG

2. USDA Outlook Forum

Next week traders will be watching the information being released from the Feb. 20-21 USDA Outlook Forum.  Within the past few years, the trading world has found the words of this event to be nearly as valuable as a USDA report itself. At this event USDA will announce preliminary expectations for how many acres of grain will be planted in the United States this spring (expect lofty, high numbers).

PowerPoint charts will then show trendline yields ultimately leading to projections of larger ending stocks. Some feel trade may shift its focus on the larger crop that could be planted in the spring, which if realized does have the potential to make ending stocks swell, and prices fall.

This perception might dampen any friendly price tone the market may have been trading, thus providing motivation for the seasonal sell off to then occur.

3. Make your strategy now

Balance the seasonals, potential upcoming export sales, and get your plan ready for making any cash sales. Quite frankly, unless China shows up and does make a hefty purchase of U.S. commodities, it seems highly probable that the seasonal sell off may occur. Therefore, be thinking of your cash sales for old crop corn or soybeans and what percentage of the crop you want to get priced on a rally. Consider buying put options for unpriced bushels to protect against a price slide lower into spring.

Reach Naomi Blohm: 800-334-9779 and naomi@totalfarmmarketing.com
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. 
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