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Multiple factors have a part in grain price declines, analyst says

Investors await the return of supply/demand factors.

Grain markets, recently, have been in a bearish funk, with soybean prices losing 93¢ the past month while corn was 13¢ lower and CBOT wheat only 5¢ lower. HRS wheat was 25¢ lower, as HRS wheat doesn’t have a lot of competition for acres when soybeans and corn prices drop like they did.  

There were a number of reasons for the decline, including improving weather for South America as dry areas in both Brazil and Argentina have seen improvements in rainfall in January as well as February forecasts.  

That means improved yield forecasts are likely to follow, and that always pressures the market at this time of year. Yet, while seasonals show price weakness for soybeans and corn this time of year, usually South American yield disappointments follow in March and April when the bulk of the crop is harvested.  

In addition, the U.S. is enveloped in impeachment hearings the past few months, and that has weakened not only the commodity markets, but stock markets as well. 

However, that is finally coming to an end – with results predictable months ago including impeachment in the House, and acquittal in the Senate. Another result also predictable was that the impeachment proceedings will hurt President Trump’s chances of being re-elected this fall – just as the Democratic House calculated it would. If they didn’t expect it to hurt Trump’s chances, they wouldn’t have proceeded with charges. The extent that it
weakened Trump won’t be fully known until November.  

A third item that has hurt commodity prices and stock markets is the media hype about the cold virus that has been sweeping China. The coronavirus is still the lead story in many media outlets. So, until that finally runs its course (meaning we stop reading about it), that will end, too.  

Then we’ll be back to boring old supply/demand numbers, and that is never very exciting or sexy. But realistically, that is the most important item and probably always will be. So, the key to understanding this market will go back to that, and not mere projections about impacts of things like viruses on world demand.  

Weather forecasts continue to wax wetter in SAM, with above-normal precip forecast the next week in all of SAM. Temps will remain above normal in Argentina and below normal in Brazil – almost an ideal forecast for this time of year. This is expected to continue to improve crop prospects there. Despite all the negative items, Tuesday prices started higher. (Is all the bad news built into the market now?)  

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Pro Ag is in Watertown, SD at the Winter Show Feb. 11-15, and will be presenting seminars at the Fieldhouse Friday and Saturday 10 - noon, including "2020 Vision Ag Outlook" in which we highlight 6 reasons why corn should hit $4.65 and soybeans $10.85 by Aug 1 this year.  

Ray can be reached at raygrabanski@progressiveag.com.  
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Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm in the country. 

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