There is a strange dynamic in the grain market this month.
“We’re starting to see a shift in the market structure … with less attention on production and more on demand,” explains Karl Setzer, a market analyst with Agri-Visor.
“That’s very unusual for this time of year. Normally everyone is talking about production right now.”
The problem is production is tough to pin down this year. The weather has been challenging throughout the growing season. Yield and acreage estimates have fluctuated. All of that could be leading traders to simply focus on what they can reasonably determine, Setzer says.
There are some unique red flags in the market, Setzer adds. The USDA recently lowered its ethanol usage estimates, and 16 ethanol production plants in the United States have closed since the latest round of refinery waivers were announced by the Trump administration. It may help that recent international events have led to an increase in oil prices.
Also, Setzer says it is possible U.S. corn yield numbers will not drop much, but acreage numbers may drop as farmers pull into fields and potentially find large wet areas where there is no corn crop. Those final figures likely won’t be known until January.
Corn and soybean exports are also struggling, and that is an ongoing concern. Nobody knows when the current trade war with China will end — it is entirely possible it may not end until after the 2020 election. It’s even possible if Trump wins re-election the Chinese could decide they can wait until 2024, he says.
With all that in mind, Setzer says this looks to be a time when farmers need to keep a close eye on the basis. Some of the best opportunities may involve basis markets and may happen very early in the harvest season.
“Farmers need to be looking for those basis opportunities,” he says.