The clash continues between the bullish underlying grain fundamentals that are keeping corn and soybean prices at historically high levels and the bearish threat of rising interest rates that will kill future demand. It’s not normal for a bull market to last more than his two years, so it’s a good idea to start thinking about the timing of the grain-in-the-bin cash sales and the pricing of his 2023 production.
It is nearly impossible to keep market prices high, and with so many swirling geopolitical activities, constant weather variables, and prevailing supply and demand scenarios unfolding, it is likely that cereals will likely grow in 2023. Selling can prove difficult. Anyway, I would advise you not to fall into the “save and ignore” trap. The calendar changes to his 2023. Here are four upcoming market concepts you should know to know when it’s time to throw your corn and beans in the trash.
Keep an eye on the weather in South America in the coming weeks as grain grows into the center of summer production. Each weather forecast is traded and vetted. Usually, when there is a “weather threat”, it also occurs in the period from mid-January to mid-February. This is added as another factor to monitor the timing of cash sales. It is recommended to place your order at the elevator in advance. This is because nighttime weather forecasts can affect nighttime trading, and price orders can be triggered while you are asleep.
Be aware of historical seasonal patterns when corn prices fluctuate. This helps with timing cash sales. For example, March corn futures tend to peak from mid-January to mid-February. I know it’s a 4 week long period to consider, but be aware there are multiple dates within that period. These dates may affect whether the rally continues or comes to a sudden stop. Soybean futures in March tend to move higher into the new year, then fall in mid-January, and the last fuller rise into early February.
Within the four-week period described above, four major events occur that can influence market price movements. Lunar New Year (festivals in China can last up to 16 days, but only the first 7 days are considered holidays), the USDA WASDE report on February 9, and finally his February 23-24 Today’s USDA Outlook Forum.
Each event has the potential for a large market move, high or low. In the January USDA report, the USDA will report final production numbers. The 2022 crop acres and yields have been harvested and are now binned. Market volatility in the immediate aftermath of the report is primarily caused by unexpected changes in production numbers, either due to production increases or decreases. This report is known to be the reason the rally continues or ends abruptly.
Chinese New Year should be careful. Because China is easing her COVID restrictions. That could mean China needs to import more grain in the short term to support new demand, or it could mean that export sales ease. It’s quiet time for the country to shut down to celebrate and announce new export sales.
February’s USDA report is generally not a major market move as January’s report brings fireworks. But since it’s not usually a major report, the lack of fresh news often exhausts uninspired traders and prices start selling.
The USDA Outlook Forum, held in late February, is often the deciding blow for prices as the USDA forecasts potential acres for next spring. This is by no means an official report, but traders are listening to what the USDA has to say. It’s often the notion of huge hedge lines and planted acres of hedge lines, predicting record yields until proven otherwise. In theory he offers the perception that the combination of the two will lead to an increase in production and that the currently tight end-of-stock situation will ease in his second half of 2023, leading to lower prices.
Many farmers are considering selling during the year-end and New Year holidays
Finally, after visiting a number of farmers, it looks like they are planning to have a cash sale right after New Years. Many producers were closing the books for his end of 2022, waiting for the calendar date to change before increasing sales.
Many farmers are also cognizant of the reality that bullish and bearish fundamentals are still colliding, and interest rates have risen sharply this year, justifying a more cautious tone. Either a dramatic weather event should push prices up, or a sudden influx of new demand should drive prices up. Last year the stars were all perfectly aligned, but this year the concept may be more of a struggle.
Keep these four market factors in mind as you gear up for cash sales of old and new crops in early 2023.
Editor’s Note: Naomi Blohm is a Marketing Advisor for Total Farm Marketing by Stewart-Marketing and a regular contributor to the Iowa PBS series “Market to Market.” Her contact is her naomi@totalfarmmarketing.com.
