The clash continues between bullish underlying grain fundamentals which are keeping corn and soybean prices at historically higher levels, and the bearish threat of higher interest rates killing future demand. It is not normal for bull markets to last more than two years, so I encourage you to start to think about your timing of cash sales for grain in the bin and for pricing out 2023 production.
While pinning a market price high is nearly impossible, and with so many swirling geo-political activities, constant weather variables and general supply and demand scenarios unfolding, marketing your grain in 2023 may prove to be challenging. Regardless, I encourage you to not fall into the trap of “store and ignore.” As the calendar flips to 2023, here are four upcoming market notions to be aware of, to help you with the timing of selling your corn and beans in the bin.
South American weather
Watch the weather in South America in the coming weeks as its grain crops are growing into the heart of summer production. Each weather forecast will be traded and scrutinized. Usually, if there is a “weather threat” it also occurs during that mid-January to mid-February window, which adds as another element to monitor for timing of your cash sales. Having an order working at your elevator ahead of time is a good idea, because sometimes the weather forecasts develop at night, can affect night trade, which can allow for your price order to be triggered while you are sleeping.
Seasonals
Pay attention to the historical seasonal patterns of when corn prices have a historical tendency to ebb and flow. This is helpful for timing of cash sales. For example, March corn futures have a tendency to peak mid-January into mid-February. I know that is a broad four-week window to consider, however, there are multiple dates within that window to be aware of as they can potentially impact whether or not a rally could continue or come to a screaming halt. March soybean futures have a tendency to rally higher into the new year, then have a pullback lower in mid-January, with a last hoorah higher into early February.
Dates to be aware of
Within that four-week window I wrote about above, there are four major events that occur that can impact market price movements: the Jan. 12, 2023, U.S. Department of Agriculture’s World Agricultural Supply and Demand Estimates report, Jan. 22, the beginning of the Chinese New Year (celebrations in China can last up to 16 days, but only the first seven days are considered a public holiday), the Feb. 9 USDA WASDE report, and finally the USDA Outlook Forum on Feb. 23 to 24.
Each of the events has potential for major market movement, higher or lower is the question. For the USDA report in January, the USDA will report the final production numbers; acres and yield for the 2022 crop that was harvested and now sits in your bins. Market gyrations shortly after the report are largely caused by an unexpected change in production numbers either an increase to production or a decrease. This report has been known to be a reason for a rally to continue or bring it to an abrupt end.
The Chinese New Year is important to be aware of because now that China is easing COVID restrictions, this could mean that either China needs to import more grains in the short term to assist with new demand, or could mean that export sales ease because traditionally, the country shuts down to celebrate, and it is a quiet time for new export sales announcements.
The February USDA report is generally not a major market mover because the January report brings the fireworks. But since it is not usually a major report, the lack of fresh news can often tire uninspired traders, and prices start to sell off.
The USDA Outlook Forum in late February is often the nail in the coffin for prices as the USDA projects potential acres for the upcoming spring. This is not an official report by any means, but traders listen to what the USDA has to say, which is often the notion of huge, hedge row to hedge row planted acres, and projected record yield until proven otherwise. The combination of the two on paper leads to increased production and provides perception that the current tight ending stocks situation will be eased in late 2023, leading to prices to fall.
Many farmers are looking to sell after the New Year
Finally, after visiting with many farmers, there seems to be plans for cash sales to be made shortly after the New Year. Many producers had squared up their books for the end of 2022, and were waiting for the calendar date to flip before making more sales.
Many farmers are also aware of the reality of bullish and bearish fundamentals still clashing, with a more cautious tone warranted this year in the wake of sharply higher interest rates. It will take a dramatic weather event to spur prices higher or a new sudden influx of demand to get prices to push higher. Last year, the stars all aligned perfectly, and this year that notion may be more of a struggle.
Please be aware of these four market factors as you gear up for your old and new crop cash sales in early 2023.
Editor’s note: Naomi Blohm is a marketing advisor with Total Farm Marketing by Stewart-Marketing and she is a regular contributor to the Iowa PBS series “Market to Market.” She can be reached at [email protected].
