The market is telling you it needs the grain now
Tight production supplies, lower yields, and uncertain exports out of Ukraine have kept markets in a sideways trading range for two months, allowing producers to harvest grain and take advantage of elevated prices.
Nearby corn futures have traded between $6.60 and $7 since early September. Exports are slow and half what they were a year ago, but lower than expected yields, ethanol demand and feed use have managed to keep prices from falling even during harvest.
The strong dollar and lack of exports along with slower barge traffic due to lower Mississippi River flows have kept prices from climbing above the $7 mark. Also, providing resistance is a good start to the South American crop, especially in Brazil.
Nearby soybean futures have traded between $13.50 and $14 all fall. Slow demand and slowing economy concern worldwide along with the low river level have kept prices from pushing through resistance. Crush and lack of nearby supply and lower than expected yields provides support.
Markets will only trade sideways for so long and trading ranges have become tighter and tighter which means technical pressure is building for them to break either to one side or the other. Historically $14 beans and $7 corn are on the high side and will need a more significant increase in demand or weather problem to likely pull through those levels at this time of year. The funds are also long these markets and should they start to liquidate and exit those positions, the fall in prices could be dramatic and fast. We also tend to drop harder and faster than we rally prices.
That means as producers you have a greater risk management concern. Be on top of your sales. With little to no carry in these markets, storage costs should be limited. The market is telling you it needs the grain now. The window for sales is getting smaller, with the potential for the river to close and as we get closer to winter when South American crops will be available.
Also, ahead in November we’ll see a new monthly Supply and Demand Report. On November 9th Russia will decide if the corridor for exports out of Ukraine should remain open. There could be a risk of a rail worker stoppage or slow-down. Also, let’s not forget economy concerns and the political impact of an election.
So, harvest could start to wind down, but marketing risks could go up. Don’t get caught in the day-to-day headlines. Stick to your plan and manage your risk with puts or if you want to own grain, buy calls for re-ownership. Be safe and try to enjoy the beauty of the season in between runs to the field and elevator.
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