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Fundamentals do matter, analyst says

01/30/2014 @ 2:44pm

Sometimes, yes, fundamentals matter.  Corn exports this morning were quite impressive at 1.84 million metric tons with Japan as the primary buyer.  China wasn’t a factor.  In fact, a load of corn destined for China was switched to Spain.  GMO issues continue to make the Chinese nervous—or the Chinese continue to realize they have plenty of corn. 

Given the positive news, corn prices rallied 6 cents for the March contract, to the higher end of the range for the past month. 

The soybean market has also been trading in a narrow range.  A small amount of export sales this week initially pressed bean prices to the recent lows.  However, the bean market rallied and still seems concerned with the domestic situation (a very tight carryout for the US again this year) and the frigid weather causing stronger feed demand.  It’s one of those days where new bearishness was not found, and prices later rallied.  Since the rain began again in Argentina, it seems like the market treads water along the bottom edge of the price range. 

For new crop, corn prices have turned sideways but bean prices continue to decline.  Prices can still influence some acreage decisions and may be trying to moderate the significant shift to bean acres that some private analysts and surveys have been suggesting. 


Upcoming

Next week, the clock will start ticking on the February average price that will be used for federal crop insurance revenue products.  Prices will be a dollar or more lower than last year, leading to lower guarantees.  Will this change the level of coverage chosen by farmers?  Or maybe reduced profitability offered by current market prices and yields will continue to suggest high levels of coverage?  Will crop insurance continue as the farmer’s marketing program?   

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The risk of loss in trading commodities can be substantial.  You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.  

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