The grain market is a bit like a vehicle without headlights right now. You can figure out some information about where you are going by shining a flashlight, but there is a lot of confusion.
“We’re flying a little bit in the dark,” says Don Roose, president of U.S. Commodities in West Des Moines.
One reason for that is the trade war between the United States and China is in unknown territory. There’s a temporary truce while officials negotiate key issues, starting in Beijing Jan. 7-9, but nobody is sure what happens if that truce expires in March.
Another reason is that the United States government has been shut down for more than three weeks, meaning the USDA is not issuing reports. USDA officials have said some of those reports will eventually be released once the government shutdown ends, but others will likely never be issued.
As a result, traders and farmers alike are searching for other sources of information. For example, Roose cites crop reports issued by Brazil’s equivalent of USDA and weather reports from Australia.
The only thing that makes driving in the dark a little easier is the fact that farmers pretty much know the road. Corn and soybean prices have been stuck in a trading range for quite a while, and nobody is expecting them to break out a big rally any time soon.
The information that is available out there indicates the weather pattern has been dry in Brazil and wet in Argentina, meaning production in those areas may not be as high as had been previously predicted. The numbers released in Brazil indicated that, but those numbers weren’t as low as some traders had expected, so soybean prices still fell last week.
At the end of the day, farmers need to be aware of the trading range and likely need to be concentrate on reducing risk and trying to find ways to break even rather than looking for any major market rallies in the near future.
Roose says the fundamentals of the market are better for corn and wheat than for soybeans. But he says a little light on the subject would still be welcome.