When searching for market price direction for corn, soybeans, and wheat for the coming weeks, the likely scenario will be quiet trade, with steady to lower prices. The market will hinge around short-term demand loss due to coronavirus concerns, and quite frankly, a lack of fresh market news to excite prices. The fund traders are now committing to being short (sellers) in the market, which also coincides with the seasonal tendency for grain prices to drift lower from March through late April. Technical support levels have also been broken on daily charts for corn, soybeans, and wheat, which will also feed the sellers mentality.
Why the short term bearish mentality?
Current USDA supply/demand data shows ample supplies of corn and wheat available, with soybean supplies getting snug. On paper, there is little incentive for fund traders to want to be grain buyers. It appears there is plenty available. That perception along with seasonal market price tendencies, and bearish looking daily technical charts will keep the market in sell mode.
What could turn the market higher in the meantime?
Keep in mind, when the funds commit to short positions, they stay short and get shorter, until a market fundamental occurs to shift their thinking. What could that market fundamental be? Obviously, if China actually bought the amount of agricultural products from the United States as they indicated they would in the Phase 1 deal that would be a huge turning point. Chinese purchases are not priced into this marketplace, and the USDA has indicated that the soonest they might print an increase in export demand specifically regarding the Phase1 deal would not be until the May WASDE report over two months away.
Will we ever see higher prices again?
This summer. I strongly believe the “Come to Jesus” day of reckoning will come to an eruptive head this summer. Here’s why. Many feel the 2019/20 crop is smaller than what is being printed by the USDA. Again, this is due to less acres planted in the rainy spring of 2019, along with lower final yields. Basis across the Midwest continues to stay strong, indicating to many that the crop is smaller than what is being formally acknowledged. Basis will likely continue to stay strong as we progress into summer. Seasonally, grain prices usually start to rally in late May, add to that any weather issues this spring, Chinese Phase 1 buying along the way, and futures prices will be off to the races. So while the short-term outlook looks for a slow grind lower for prices, better days lie ahead.