Last year was an unusual year for grain prices, as they went into a rare counter-seasonal rally that has, for the most part, held up since then. This year, the question is whether the pattern will revert to a normal seasonal one or whether it will be more like last year.
“We’re still sorting it out,” says Don Roose, president of U.S. Commodities in West Des Moines.
Normally, this is a difficult time of year to be bullish, Roose says. The harvest is near. The market is generally looking at a temporary glut of grain coming off farms. Last year the crop got smaller while exports suddenly got larger.
This year many analysts think the crop may be getting bigger, but there isn’t universal agreement on that. Dry conditions in the western Corn Belt have farmers in those areas skeptical of yield projections.
The market, meanwhile, is stuck in a trading range as everyone waits for news of yield monitors in combines showing a more accurate picture of this year’s crop.
From a marketing perspective, Roose says there are a couple of messages. One is that there isn’t enough carry in the market at present to warrant spending much money paying for commercial storage. Another is that the basis is reasonable.
For many farmers, that means they should take advantage of their on-farm storage and perhaps look to sell some grain into a market that is still very good. If they want to buy some upside protection, they could use market tools such as call options.
Cash flow needs may be a factor in many sales. And the messages the market is sending may change once there is a better picture regarding yields and the size of this year’s crop. But, for now, the market is still sorting out just what the crop looks like and just what the demand looks like.