A harvest season rally has been a pleasant surprise, but as with most rallies, watching for the right opportunity to sell is important.
Mike Zuzolo of Global Commodity Analytics said the weather from this summer and in South America has pushed prices higher in the grain markets, but outside factors, both domestic and global, may be reason to curb excitement.
“I want to pull everyone back and make them realize that, yes, we have weather on our side, but this has macro on its side too,” Zuzolo said. “We are leaving some of that out at this stage. Don’t rely on that too much on the macro with a contested election, rising COVID and no stimulus as far as the eye can see.”
Despite the big rallies in soybeans in recent weeks, including a Nov. 5 gain of more than 20 cents in many futures contracts, Zuzolo said he is more bullish on corn and wheat.
Corn has performed well in recent exports, coming in 75% above the previous four-week average from Oct. 23-29, and wheat was up 10% from its four-week average. In the same export report, soybeans were down 32% from their four-week average.
“That shouldn’t be surprising,” Zuzolo said. “In a revenue per acre perspective, percentage gain perspective and leadership and price trend perspective, wheat and corn are still my best votes for upside potential at this point.”
Zuzolo said if the market stays positive due to outside factors and from the season’s weather issues, there is potential for soybeans to find their way another 40 to 50 cents higher, but it might not be worth the risk.
“It wasn’t long ago we were trading $8.50 beans and now we are on the doorstep of $11.50 beans, so that’s something to keep in mind,” Zuzolo said. “Where should the risk/reward be in that mindset?”
He also said to keep an eye on how the U.S. dollar is reacting with the fallout of the general election, as that will have the power to swing markets.