Grain with faded money

Global markets have been extremely volatile during the spread of coronavirus as traders are uncertain how the disease will affect demand. That has spilled over to the grain markets.

Fears of decreased demand have created some days of significant losses in corn and soybean futures contracts throughout February. Much of that is due to logistics, according to John Payne, market analyst for Daniels Trading.

“There’s a gap now of a glut of supply on one side of the world and then a need for it on the other side of the world with no way to get it there,” Payne said. “The market is torn between what’s going to happen here in the long run and just the immediate need to run to cash.”

Recent reductions in tariffs are a reason for optimism, as more export business would be beneficial to all grains, Payne said. However, that has yet to come to fruition as of the end of February.

“Exports should be picking up now,” Payne said. “At this point a year ago we have moved 25 million metric tons (of corn), and we’ve moved 13 so far in this marketing year. Demand is certainly lagging.”

However, Payne noted demand has been strong domestically, as feed has stayed in heavy demand due to continued increases in the U.S. cattle herd.

One area of major concern for Payne was the state of the U.S. dollar. He said with uncertainty in global markets, traders are taking their money out of China and putting it into the U.S. markets. That makes for a higher U.S. dollar, but a high dollar equates to lower commodity prices.

“The downside is really the farmer and anybody who produces because they don’t want that,” he said. “We want to be a (lower U.S. dollar). for commodity exports, you want to do it in a weak currency, and we are on the opposite side of that right now. I don’t know if that changes anytime soon.”