This past week was one of uncertainty for the grain markets as traders were trapped between the dual shadows of COVID and the election. But even without those issues, there are challenges facing the market.
For about two months the market rallied, largely on the strength of weather concerns in the United States and South America. The size of the carryout has been reduced. But the weather concerns have largely eased.
“We had planting concerns in Brazil,” says Karl Setzer, a market analyst with Agrivisor. “Everybody was concerned about getting the crop planted in Brazil.”
But it now appears that planting in Brazil is getting closer to normal and there has been a shift in the fundamentals.
“The market feels more comfortable about South America,” Setzer says.
And Setzer reminds farmers that South America is now the biggest player on the world stage, especially when it comes to soybeans. He also reminds them that while the United States and China have been engaged in a trade war, China has been paying for the Brazilians to build new roads and rail lines to transport that grain to the world market.
The United States will get past the uncertainty of the election, and someday the world will get past COVID, but right now those two items are big issues. When they are gone the issue of South America and China will still be there.
For farmers looking to market grain, Setzer says the fall rally appears to be over, at least for now. Everyone will be watching the USDA reports to see whether officials there reduce the size of the domestic crop in the coming months.
Barring a change in the U.S. crop size, marketing decisions in the coming months will not be as fun as they were from August until October. Setzer advises farmers to reward any market rallies and to look at cash flow needs. And he says that while the futures market isn’t especially exciting right now, it might be worth it for some farmers to look at whether it pencils out to market any 2021 crop.