Grain commodity prices have seen a sharp selloff thanks to a mass exodus of fund traders. Fundamentally, nothing has really changed for grain markets. On the supply side, the United States is still dealing with nine grain and oilseed commodities with historically tight ending stocks, just like last year.
Unfortunately, the funds don’t always care about what is happening in your backyard, their mission is to make money. With a lack of immediate bullish news, they have decided to step to the sidelines.
This may also be one of those times when commodity prices bow to the pressure of negative outside market influences, rather than true market fundamentals. Right now, from the perspective of fund traders, they see the constant increase in interest rates as a reason to temper demand for commodities in the year ahead. For the Fed, it continues to raise interest rates on the hopes that higher interest rates will reduce demand, (while it also hopes Mother Nature cooperates weather-wise in 2023 to naturally increase the overall supply of grains).
And it is this perception and mindset that is pushing the funds to exit long positions in grain, and even be so bold as to become net sellers in some commodities.
Unfortunately, we saw this same type of trading behavior from them back in March of 2008 (the year that 2023 is currently being compared to). A quick price sell off, then and now, for “no apparent reason” left many farmers scratching their heads and wondering if they had missed the big grain marketing opportunity for that year.
Some producers are likely at or near breakeven now. Will prices come back? Time will tell, but I encourage you to be aware and use the seasonal grain tendencies to your advantage this spring and early summer and be more aggressive to capture and lock in prices early.
In hindsight, the seasonals have worked quite well this past year, nearly to the day. So to offer a word of encouragement, seasonally, new crop corn and new crop soybeans have a tendency to start to rally higher starting on April 1.
Why April 1? The Prospective Plantings report is now old news, last minute acreage competitions are underway, something usually goes awry with the Safrinha corn crop growing in Brazil, and Mother Nature usually has a trick or two up her sleeve.
Even back in 2008, after the price sell off, starting April 1, corn and soybean prices began to rally and gained back all of the early losses. Of course, past performance is not indicative of future results; however, those seasonals are pretty compelling.
A spring rally—whew. Great news. So when should I price that grain? The seasonal answer is that there is a four-week stretch of time between mid-May and mid-June to achieve that potential opportunity.
You know…the four weeks you’re busy in the fields finishing up planting. The four weeks when the last thing you’re thinking about is marketing your grain, because you’re just hoping it comes up out of the ground. But mark it on your calendars now and be ready to pull the trigger on sales.
Please make time today to think about where your current cash sales are, how much grain you have forward contracted, and consider potentially protecting the value on any remaining unpriced bushels of grain. Also think about that 2024 crop, too.
It is rare for a bull market to last more than two years. Be confident with your cash marketing skills and forward contracting. Also, this is going to be the year to understand various put option strategies to protect unpriced bushels for 2023 and potentially beyond.
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].
