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160848

Which Fundamentals Are Important to Watch?

“How do you know what to watch? Seems like what used to be important isn’t important anymore!” I have heard this commentary often throughout the past few years from producers across the country. As futures market volatility continues to thrash and twist, with plunging lows and gravity-defying highs, knowing which fundamentals to watch will lead to less gray hair and use of stomach antacids for farmers.

Here is a list of what I watch daily:

  1. Supply fundamentals – Not just here in the U.S., but around the world. How big is the U.S. crop? What’s happening in South America? How is that wheat in Australia or even in Russia? This means monitoring the USDA monthly reports, as well as weekly crop progress reports, in addition to similar reports released for other countries of the world.
  2. Demand fundamentals – Is demand for corn growing? What’s happening with corn demand for ethanol? How was the monthly soybean crush? Are U.S. grain exports still going strong? How much grain is being used for livestock feed? Again, this is not only something to monitor here in the U.S., but around the world as well.
  3. Weather – Watch weather across the world in key crop growing regions because one weather forecast can change prices in a hurry, and whether or not a substantial weather event occurs (drought, floods, hurricanes, and frost) can influence the supply picture for months.
  4. The U.S. dollar – The value of our currency matters! When the value is lower, the U.S. will export more commodities since as the currency exchange will make it cheaper for other countries to import our products.
  5. Global economies – Housing bubble in China? Brexit affecting the European Union? Export taxes being reduced in Argentina? Yes, it all matters. And, it all can affect the price of the crops growing in your backyard.
  6. Energy markets – We’re talking crude oil, natural gas, heating oil, and gasoline. Keep in mind one third of the corn grown in the U.S. (5 billion bushels) goes directly for use in ethanol.
  7. The funds – Yes, we are talking about those traders that have big money invested in commodities. When they move from buyers to sellers, or sellers to buyers, just that market momentum can move grain prices $1.00 in one week! The funds have become their own fundamental. Yet, it is possible to track their movement daily and weekly.

Keep in mind, now that you know what to watch, it’s important that you make time every day to keep an eye on all of these fundamentals. On a quiet market day, they all bear equal importance, but if one or two of these fundamentals perk up with out-of-the-norm activity or news, then they become a market mover and ultimately a price mover. At Stewart-Peterson, we also incorporate something called Scenario Planning to help anticipate which of the above fundamentals could suddenly trump the other. Marketing is something that must be monitored daily; you need to decide if you’re going to become the expert, or hire one.

If you have questions, you can reach Naomi at nblohm@stewart-peterson.com, or post a marketing question on the Women in Ag Discussion page.

The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures trading involves risk of loss and should be carefully considered before investing. Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2011 Stewart-Peterson Inc. All rights reserved.

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