Prices have continued to stay high throughout planting season, but change may be on the way. That isn’t necessarily a bad thing, however.
“I think it would be actually healthy for the market if we would have a major correction,” Mike Zuzolo of Global Commodity Analytics said.
He said demand has been rationed after three straight weeks of “pretty poor weekly export sales” and some cancellations. That indicates prices are too high at the moment, and buyers are starting to focus on the next crop year contracts.
As corn and soybean prices are higher, those looking for livestock feed are expected to switch to wheat. Zuzolo said in some areas in Kansas, the cash price for hard red wheat was 71 cents below cash corn prices. As wheat harvest comes into play, he said cash prices will play a major role in the decisions of livestock operators, and that may determine market directions.
“This is similar to 2008 and 2012,” Zuzolo said. “We had a pretty decent correction in soybeans in May, but both years went higher in June. If we get a May correction, with the problems in South America that are not getting any better and inflationary pressures, I think higher price levels is historically very possible.”
The struggling South American crop continues to play one of the biggest roles for U.S. grain prices, as continued issues with the crop have estimates dropping nearly every week. That has farmers excited after what has been a quick planting season so far in the Midwest. With few issues being reported in the U.S., Zuzolo said this will help solidify what to expect out of the planted acres this year.
“If we take off South America and take planting off the chessboard, now it becomes yield,” he said. “The earlier the crop gets in and gets up, the more likely we are going to get normal to above-normal yields. Unless we get a surprise coming out of Brazil for corn, it would make sense to me that we would have a correction.”