Two items appear to be influencing the grain markets right now, but traders aren’t completely sure how to assess them, according to Karl Setzer at AgriVisor in Illinois.
The first is, of course, the weather. It has been a long, wet growing season and is now a long and wet harvest season. But this week showed the promise of better weather, and the market is looking at that trend.
Complicating the weather issue is how the weather in South America affects the planting season in that region. The bad news is planting acreage is expected to rise in South America, which should put long-term pressure on the grain market.
The second major item of interest is trade — more specifically, the trade war with China. On October 11, the Trump administration announced what it called a partial agreement with China. But that announcement was vague and did not include many details as to what a partial agreement meant.
“That was sort of a red flag,” Setzer says.
Over the weekend China clarified some of the details, saying it had agreed to buy more U.S. products and the United States agreed not to implement new tariffs on Chinese goods that had been scheduled to go into effect on October 15.
That is not the same as the two nations agreeing on a new trade deal. The market is looking at those two big items and trying to decide what to do.
Setzer says the basis on grain is getting to be volatile and that could mean opportunities for marketing old-crop grain during the harvest.
He also says the market was until recently paying farmers to store grain, but that support is weakening. July corn, for example, has about a 21 cent premium over cash. That is less than 3 cents a month, which means farmers need to decide if that is worthwhile. In many cases, it doesn’t pay to use the futures market to store corn.