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.
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.
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.