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Keep an eye on holiday grain markets
Holiday trading is upon us, but don’t translate that into “It’s safe to not pay attention.” First, big swings in price can happen at any time, but they can happen especially during light volume days or holiday-shortened trading sessions.
Here are some things to pay attention to during these upcoming holiday weeks:
Basis levels. Commercials have been showing strong basis levels for corn for December and are now increasingly showing strong levels for January. For those who need to move cash corn early in 2014, this improvement could be welcome. Many have held off making cash sales at the end of 2013. Since it appears farmers have a lot of unsold inventory, being first to make sales could be better than being last.
Prereport estimates. All eyes are on the January 10 USDA reports — final crop production, grain stocks, and supply/demand tables. Prereport estimates and/or well-followed private estimates could begin surfacing immediately after the first of the year. Do any numbers cause rallies that need to be met with sales?
South American forecasts. Right now, there is concern about heat and dryness in parts of Argentina, although rain may come through next week (amounts and coverage still vary widely). There is not the same level of concern regarding Brazil. Rains are better there, especially in the northern part of the country. Traders are paying more and more attention to the forecast every day. This will continue as the calendar marches through January and February, when the main crop of soybeans will setting and filling pods.
Chinese trade issues. GMOs in corn shipments, GMOs in DDG shipments, the pace of soybean shipments, the flow of new soybeans sales or the opposite — any potential sales cancellations. Face it, news about China moves markets! Secretary of Ag Tom Vilsack is making a pre-Christmas trip there, and the market will be looking for resolution to the GMO issues. If it becomes clear this is part of a larger trade dispute, the resolution could be slow in coming, a negative for ag prices.
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.