Farm Progress is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Serving: United States
Market chart with blue, red, purple lines on green background. maciek905/Thinkstock

Grain futures: What to watch for in February

U.S. Dollar, exports, seasonals, and USDA report demand could all influence prices.

The month of February is a time when grain futures have a tendency to move higher due to various factors.  With all of the current global marketplace drama, whether or not this price move higher occurs depends on these four important fundamentals.

1. The value of the U.S. Dollar

First and foremost remember that when the value of the U.S. Dollar is lower, it makes it cheaper for other countries to import our commodities based on currency exchange rates. In recent weeks, the value of the dollar has strengthened its upward climb as global markets are concerned regarding the recent outbreak of coronavirus in China. In addition, money is moving from commodity and equity markets into “safer sources” such as the dollar and gold futures. Looking at daily technical charts, the current trend is for the dollar index to work higher, which could be difficult for commodity markets to handle as we battle with global competitiveness.

2. Exports

Will China show up and buy U.S. commodities now that the Phase 1 deal has taken affect? Will the buying especially materialize now that prices have dropped lower in the past week due to Coronavirus fears? Overall, wheat and soybean exports have maintained USDA projections, while corn export sales continue to fall short of expectations. The market continues to trade in a “wait and see” attitude regarding increased demand for U.S grain exports. Thus, if China actually buys in the weeks ahead, the marketplace will perceive it as new demand and prices should boost higher.

3. Seasonals

If you look at the seasonal price pattern for both corn and soybean futures, both the 5 year and 15 year price patterns agree that a price rally has a tendency to occur during the first two to three weeks of February. Sometimes that price rally will last through month end. Yet, one thing becomes blaringly obvious, the rally is usually done starting in March, with prices then slipping lower into the end of May. Yes, a multi-month sell off based on the assumption the United States will plant an exceedingly large crop in the spring with trendline yields assumed. 

4. USDA report demand

Some in the industry have asked, if the current administration is so confident in the Phase One deal, will the USDA show increased demand in the upcoming February 11 USDA WASDE report? Because let’s be real, the January USDA did not show any dramatic increases in export demand for corn, soybeans or wheat. So, one would potentially think, that the USDA ought to show an uptick in demand on the upcoming USDA report. If they do not, some feel it might show that the USDA does not actually believe that China will come through on their end of the negotiations.

2020 looks to be a year with even more twists and turns in regards to pricing opportunities for your grain. Make sure you are confident in your marketing strategy so you can face whatever the month of February brings to the marketplace.

 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
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish