On the surface, nothing much seems to be happening in the corn market. Prices haven’t shot up or down lately. You could almost call it a doldrum.
But appearances may sometimes be deceiving, according to Karl Setzer, an analyst with Agrivisor. The corn market may be in a very difficult spot at the moment — ready to jump up or drop like a rock.
“It’s a precarious market,” Setzer says.
Farmers, he adds, need to be aware of that situation so they aren’t caught off guard if the market suddenly sinks or flies.
The corn market also isn’t making much sense at the moment, Setzer says. Many of the funds are at record short positions, but the technical indicators would appear to say those funds should be long.
“Somebody’s wrong in the market,” Setzer says. “We just don’t know who.”
There are fundamentals to watch. Crop conditions would appear to be good for corn and beans across much of the United States. That should mean the market isn’t likely to build a big risk premium into the price, at least not for production.
The livestock market appears to be stabilizing after the shock of the COVID-19 epidemic threw it for a loop. The ethanol market is still struggling, thanks to low fuel prices and usage. Most analysts are projecting large grain carryouts next year.
All of this points to a steady but bearish market, and one where farmers may want to take advantage of any decent sales opportunities, especially for old-crop grain or for the percentage of new crop grain that may not be covered by insurance.
Setzer says options would appear to be a better way of getting some protection in the market than futures. But he also says there is a tremendous amount of confusion and uncertainty in the grain market. Because of that, he continues to recommend farmers be prepared for any contingencies that may suddenly push prices in either direction.