The devil is in the details, and right now for the grain markets, there aren’t many details to go off.
With harvest in full swing, though significantly behind in certain parts of the Midwest, hopeful eyes are watching the U.S.-China trade headlines, waiting for news on the first phase of a trade agreement.
“The lack of details and the continued lack of forward progress” is concerning, said Mike Zuzolo of Global Commodity Analytics.
He said there always seems to be progress made at the last moment, but only enough to keep talks going as opposed to accomplishing the goal.
“We never get details of what is going to happen or what is going to get inked,” he said. “Even in the ‘phase one’ agreement, which you would think would be easy to get details of, there are no details.”
One factor Zuzolo said may come into play is China losing some of its leverage, as U.S. farmers continue to be delayed this fall and South American farmers are slow to plant. If supply tightens, prices may increase, which would force China’s hand.
Despite the uncertainty, soybeans haven’t had too many issues trading higher in recent weeks. That is due to recent USDA forecasts and stocks and yield reports coming in. The trade has put soybean on the “long side of the spread,” Zuzolo said.
“They are the ones that trade has felt comfortable buying, in a large part due to the China trade phase one and exports jumping as a result of a more favorable trade relationship,” he said.
The November bean contract is up around the June highs and hold a premium, he noted, with the $9.40 price point a key point of resistance. Zuzolo said that’s the mark he is hedging and selling up against if the market can’t push through.
In Zuzolo’s eyes, the soybean futures and cash markets are holding premiums to the corn, and as a result he is recommending the possibility of more “off-the-combine” sales for soybeans.
“(I’m) looking to re-own on paper on a pull-back, or if we would close above $9.40 on a weekly basis,” Zuzolo said.