Hurricane Ida caused a drop in grain prices over the past week as grain facilities saw shutdowns and transportation was impacted. As the affected areas get back online, don’t expect the prices to rise as fast.
Market analyst Bryan Doherty with Total Farm Marketing said soybeans especially could have a bearish tilt moving forward. While strong demand and tight supplies have “set the stage” for a rally, and any reports of lower-than-expected yields will also support the market, soybeans are already very high, leading to traders being wary of going much higher.
“At some point, end users will refuse to buy at a higher price,” Doherty said. “That seems to have been the case over the last several weeks where soybean prices have failed to rally, despite significant weather uncertainty in the western Corn Belt.”
He noted crushing plant usage has slowed down and exports are starting to slow as end users are expecting good new crop to be available and higher soybean acres coming in the next South American growing season.
“High prices are curbing demand,” Doherty said. “Whether the curb is either temporary or long-term remains to be seen. The bears will argue that the market is looking ahead. If yield is above the USDA estimate, it is likely that end users will stay with a very stingy buying methodology.”
Perception is also key for traders in the soybean market as well, Doherty said. With prices reluctant to move to even higher levels, the market doesn’t appear to be taking good news with as much excitement. That gives negative reports even more weight.
“Just the perception of higher supplies from South America, less demand or both could leave bullish traders frustrated that the market isn’t responding the way they feel it should,” he said. “Perceptions of crop size in the U.S. may be changing.”
He said prices are “not likely” to stay at their current levels, as the market can be volatile at higher price levels. With higher prices over the summer months, international markets will respond accordingly going into their seasons, which could drastically alter markets. Farmers should use a strategy moving forward to take advantage of any good 2022 prices, he said, as high prices are no guarantee.