Buckle up for the bumpy road of price discovery

By Jon Scheve, Superior Feed Ingredients, LLC

Soybean futures had a historic price decline on Thursday but rallied back half of that decrease on Friday. Corn futures also fell the limit on Thursday but rallied back on Friday nearly all that was lost the day before. 

Every day there is some type of rationale used to justify the price movement, but fundamentally supply is still tight, and the upcoming weather impact is still unknown. Therefore, last week’s price volatility is likely to continue for at least the next 4 weeks. The weather reports are updated every 12 hours and each one can cause the market to move substantially. Several weeks ago, I said to buckle up for a bumpy ride, but with these price swings it seems more like farmers are going off-roading and need to be strapped in with a 5-point harness. 

Last week I traveled to and from Minneapolis to our family farm near Beatrice, NE. I have highlighted the route I drove on the map below with the yellow line.

Based on this map I expected to see fields with signs of stress in southern Minnesota and northern Iowa; however, the corn I saw there did not look like it was experiencing any significant drought conditions. Comparatively, western Iowa and eastern Nebraska had more fields looking dry, even though the latter of the two does not align with the data on this map.

In 5 of the 6 days, I was in Nebraska, it hit 95 degrees and the corn was rolling up each day in protection from the dry hot weather. On Thursday, the day we travelled back to Minneapolis, it hit 104 degrees with 20 mile per hour winds. While these current extreme temperatures are not great for corn development, it is only June and corn is not soaking up as much moisture now compared to what it will need in the middle of July.

Some weather forecasters are comparing current weather conditions to the dry years of 1988 and 2012. They suggest that July could be extremely dry, and a huge price rally will be in order. Others are anticipating timely July rains like 2013 and 2017, which resulted in prices trending lower throughout the growing season.

Again, this week some analysts are predicting the highs are already in, while others expect new highs in the next month or so. The 2021 corn production estimates will remain uncertain until after the June 30 Acreage Report and once reliable weather forecasts for the pollination period for most of the crop become available. Until both happen, the market will be highly reactive and extremely volatile.

Please email jon@superiorfeed.com with any questions or to learn more. Jon grew up raising corn and soybeans on a farm near Beatrice, NE. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.

Trading of futures, options, swaps and other derivatives is risky and is not suitable for all persons. All of these investment products are leveraged, and you can lose more than your initial deposit. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful, and in accordance with applicable laws and regulations in such jurisdiction. The information provided here should not be relied upon as a substitute for independent research before making your investment decisions. Superior Feed Ingredients, LLC is merely providing this information for your general information and the information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision. The contents of this communication and any attachments are for informational purposes only and under no circumstances should they be construed as an offer to buy or sell, or a solicitation to buy or sell any future, option, swap or other derivative. The sources for the information and any opinions in this communication are believed to be reliable, but Superior Feed Ingredients, LLC does not warrant or guarantee the accuracy of such information or opinions. Superior Feed Ingredients, LLC and its principals and employees may take positions different from any positions described in this communication. Past results are not necessarily indicative of future results.

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