USDA report sets stage for markets into 2009
There weren't a ton of surprises in Monday's USDA Crop Production report numbers -- figures for both corn and soybeans were near trade estimates.
Now, analysts expect a lull in farmer selling that could last through the first of the '09 calendar year, while wheat exports may see a decline because of a current worldwide surplus. Corn and soybean prices -- led by the latter -- will likely see a bounce after the first of the year, market-watchers say, at which point, farmers may see more incentive to sell.
"I would expect that if they haven't sold ahead, farmers will stry to store as much as they can," says Jack Scoville of Price Futures Group. "They're not thrilled with prices. If they think they're going to see higher prices down the road, they will hold on to as much as they can. This might limit the downside, at least in the cash market."
Jack Scoville, Price Futures Group, says the corn market is looking for a seasonal low, the beans should go up from here, and wheat is looking for a bottom at today's prices (video by Mike McGinnis).
Outside economic factors and their weight on the grain trade, Scoville adds, will be the main reason for the relative lack of downward pressure from this point on.
"We'll see it hold better than you otherwise might. Outside markets are showing a little more stability here. That might encourage a little more selling -- the farmer might feel better about what's going on in the outside economy," he says. "For corn, as you get through the winter and into planting season, we might see the $5 range. Soybeans are the leader on the upside. I'm thinking we could see prices back to the $11.50 to $11.75 area with good luck. I think we're in the lower end of the beans. I don't see the need for them to go much lower."
But, farmers may need to "recalibrate their expectations" in eyeing what will be considered a rally in the coming months, says Gavin Maguire, market analyst with EHedger. Market action into early 2009 will see more sideways movement, he says.
"Farmers' breakeven prices are above current levels. They're going to be sitting on an increasing load of corn going into this winter. People need to recalibrate their expectations of the corn market," Maguire says. "As soon as we resurface above $5 or some price people like on the cash front, we will see pretty steady streams from the farmer. That will keep corn locked in a sideways trading range for quite some time. They're merely waiting for a chance to sell at a profitable level."