What’s driving the market?

Ag Marketing IQ: Ponder the production woes and managed money whims, while taking advantage of this harvest rally.

Jason Meyer, Hedging strategist

Before we figure out what’s driving higher market prices, let’s take a quick look at the Quarterly Grain Stocks Report released by the UDSA last week.

Corn surprised the market. USDA stated carryout at a 1.760 billion bushels when the market was looking for around 1.844 billion bushels. The reason for the discrepancy: higher usage stemming from lower prices.

Soybeans and wheat stocks came in close to the market’s expectations.

Many farmers are asking: “Why?”

A quick look into the “Why” shows that ongoing dry weather in South America continues to garner the market’s attention.

This is similar to what the U.S. producer experienced in February/March. As the weeks progressed, the extreme drought situation across the U.S. eased and erased moisture deficits. As Brazil gets into the wetter season, look for drought conditions to improve.

Secondly, China recently injected a stimulus package, which some have surmised may lead to a bigger appetite for U.S. grain. The main reasons for the injection: help counter deflationary pressure, spur on consumer spending and help prop the real estate market.

Thirdly and most importantly, managed money covering the record short position they established in July.

As of the latest Commitment of traders Report on Sept. 27, managed money has covered over a billion bushels of corn positions and almost 554 million bushels of soybeans. Major reasons for covering these positions include: the lack of August and September rains in key U.S. growing areas, geopolitical risks in the Middle East supporting energy values, a potential increase in U.S. export business as cuts to EU crops have occurred and the continued concerns over access to Black Sea crops.

Marketing based on weather ‘only’ is extremely difficult. What’s even more difficult? Trying to figure out what direction the managed money crowd leans on a particular week.

Don’t try to outguess the market. Remain flexible in your marketing decisions and be ready to quickly adapt to the changing tides. Similar to last year, a rally during harvest may be your best marketing opportunity for cash bushels until next summer.

Have questions on how to stay flexible in marketing? Feel free to contact me directly at 314-626-4019 or anyone on the AgMarket.Net team at 844-4AG-MRKT.

The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. AgMarket.Net is the Farm Division of John Stewart and Associates (JSA) based out of St Joe, MO and all futures and options trades are cleared through RJO’Brien in Chicago IL. This material has been prepared by an agent of JSA or a third party and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading information and advice is based on information taken from 3rd party sources that are believed to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. The services provided by JSA may not be available in all jurisdictions. It is possible that the country in which you are a resident prohibits us from opening and maintaining an account for you.