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 updates monsitj / ThinkStock

Quiet markets may be short-term reality

Better days lie ahead. Seasonally, grain prices usually start to rally in late May.

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.

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. 
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