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Volatility has Returned to Grain Markets

Updated: 03/26/2014 @ 11:30am

Volatility in the grain markets has been somewhat subdued, especially in corn and wheat during the early winter, as futures prices remained in a downtrend. Both wheat and corn, however, have turned around in recent weeks with wheat prices rallying over $1.50 and corn well over $.50. Even so, the corn market remains in a larger general sideways to lower price pattern. For many, it feels like volatility is not what it was in recent years. When taking a step back and looking at other agricultural commodities, volatility is alive and well and perhaps stronger than ever.

Milk, hogs, and cattle have been in strong uptrends with acceleration in recent months. Record high levels have been established in all three markets. Yet, corn producers have not felt the effect of volatility that past years have offered. As of this writing, December corn futures are hovering near $4.85 and could range between $3.50 and $6.00 in the year ahead. Throw a weather event in the mix and $8.00 is back in-sight. Carryout has been on the decline the last five months as the USDA has continually trimmed projected carryout. There has been some debate whether livestock feed usage numbers are too high. As of this date, the USDA has not curbed these figures. Keep in mind that this was one of the more difficult winters in livestock feeding history. The stage is set for increased volatility. Either weather will be adequate or not. Good weather could push prices much lower. Should less-than-ideal weather occur, expect prices to once again extend themselves to the topside, perhaps further than most expect.

The key to all of this, from your perspective, is to be prepared so you don't get emotionally trapped. Low volatility can lead to a lack of planning. Other priorities take precedent. You can become emotionally trapped when you sell too much grain too low, should prices scream higher. If prices fall apart, you haven't got enough sold. The key is preparation and balance, as well as execution.

Be prepared for high volatility, as it could kick in at any time. Know and use the right tools. Have a critical conversation with your lender so that you can execute marketing strategies before weather developments this year. Trying to catch a down market without strategy is akin to trying to catch a knife when it's dropping.


If you have questions or comments, or would like help implementing strategy for the year ahead, please contact Bryan Doherty at 1-800-TOP-FARM ext. 129.

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully considerwhether such trading is suitable for you in light of your financial condition. Hypothetical performance results have many inherent

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