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Markets will continue to challenge in the New Year
Markets rebounded into the end of year, adding a weather premium for South America and hope for increased demand in China in the new year.
Nearby corn rallied back above $6.80, clearing all its moving averages. March beans pulled through $15, a long-held psychological resistance area. Wheat also rebounded on concerns over crop damage in the plains with a lack of snow cover and freezing temperatures, along with technical buying and increased tensions in the war between Russia and Ukraine.
In the new year, traders will focus on the weather in South America and the upcoming USDA Supply and Demand report due Jan. 12 at 11 a.m. ET. In the past, we have seen markets put in highs in that first or second week of the new year, then sell off before a spring rally. These selloffs can be fast and extreme.
Take advantage of the spike
With that in mind, producers should take advantage of this end-of-year spike in prices and add to sales for both old and next year’s crop. New crop hedging should also be considered if you are not comfortable locking in physical bushels.
Argentina has struggled with weather concerns and continues to lower their production estimates. Most of Brazil, however, has had favorable weather and looks to more than exceed last year’s crop and offset losses in Argentina, allowing the global supply of soybeans to rise.
Continued concerns remain in the war between Russia and Ukraine. The long-term affects will continue to provide support to grain prices, especially corn and wheat due to lack of plantings and logistics for exports.
In addition, there is hopes for increased demand in China in the coming year as they attempt to manage COVID infections and policy and bolster their economy. However, many world markets are below our domestic prices.
South American weather is expected to improve in the latter part of their growing season, with thoughts of El Niño changing into La Niña weather pattern.
Reward rallies, use options
There remains a lot of uncertainty and volatility in these grain markets moving ahead. Be mindful of where price levels exist in relation to your overall marketing efforts. Do not assume that you will be able to match record sales from last year. Continue to reward rallies and use options to manage downside risk.
If you are making sales for next years’ crops now, consider using July bull call spreads for weather risk into summer months.
Marketing will continue to be challenging. Consider working with an advisor to help you determine which marketing tools to use in order to enhance your efforts and keep you on top of the day-to-day happenings.
About the author
Cathy Ekstrand is a senior market advisor with Total Farm Marketing, formerly Stewart-Peterson Group. She currently works from her home in rural Yates City, IL. After graduating from the University of Illinois with a degree in AgCommunications, Cathy’s resume includes working for Shissler Seed Co., now LG Seeds and Galesburg Register Mail as well as a position in sales while staying at home with children. She began her career with Stewart-Peterson in 2001. She works with farm clients across the country and has presented at Annie’s projects all over the state. She and her husband have a small farm and encouraged their two sons to pursue careers in agriculture. Cathy and her husband Roland are also grandparents to three beautiful children, two boys and a baby girl.
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