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Weather markets ‘dangerous’ for producers, traders

Weather markets ‘dangerous’ for producers, traders

Corn Beans Barge and Truck Quad graphic

A new year means renewed activity in the markets, but the current news cycle is showing this may not be the best time to commit to either buying or selling.

Don Roose, president and market analyst for U.S. Commodities in West Des Moines, Iowa, said with crop expectations in South America in flux and export demand a major unknown, the best approach is a cautious one.

“I think you have to be careful with the market,” Roose said. “We are knocking on the door of South American harvest, and export pace is starting to slow because South America will pick it up. Weather markets are very dangerous because they come and go very fast.”

Corn markets rallied in December on major concerns about South American weather, but those sentiments have leveled out. Roose said weather rallies are a good time to buy, but they can get wiped out at a moment’s notice. He looks at wheat as an example.

“We just saw that in wheat, where it rallied on wet weather in Australia,” Roose said. “When we stopped, we found out the crop was bigger and Argentina’s crop was bigger, now we are $1.20 off the top. When you have high input costs, there’s nothing worse than having prices coming under pressure.”

The state of the market is also different as 2022 begins, Roose said. Corn and wheat are significantly higher than January 2021 when the increases began. Producers and traders weren’t sure prices would continue going up. With this year beginning at a higher level, and China having a normal crop, those increases may not repeat.

Exports are a major point traders hope to learn more about in the Jan. 12 Supply and Demand report from the USDA. The figures of available crop and expected export business will be revealed, allowing traders an updated glimpse at what the future may hold for U.S. crops and how weather has affected the South American season.

“Yields so far have been bigger than people thought,” Roose said. “The exports on soybeans and our ending stocks on beans grow, but does the government increase ethanol demand? That’s the big question. What does the government say on the demand side of the market?”

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