Grain markets are more volatile during the growing season as prices respond to weather forecasts and shifting yield expectations. This year the price roller coaster has started earlier than normal. The upcoming Northern Hemisphere growing season sets the tone for the rest of the marketing year. Farmers should buckle up for another exciting price ride until the crop is counted and in the bin.
Political theorist Vladamir Lenin said; “There are decades when nothing happens, and there are weeks when decades happen.” He spoke of politics, but the principle applies to grain markets as well.
Most grain markets went through an eight month period when there was little fresh news and mostly consistent prices, besides the normal ebb-and-flow that caused some movement. The general sense of the market felt bound by abundant supplies and firm demands. However the overall environment didn’t have much to shake it until now.
The last few weeks have built excitement. Oilseed markets benefited from weather problems in Argentina and hard red winter wheat crops raised concern over dryness in the U.S. Southern Plains. But the big jolt came from the March 29th USDA Prospective Plantings report where the market was caught off guard by lower than expected corn and soybean acreage estimates.
This week, the lingering cold weather increased worry about winter wheat conditions and possible planting delays. Anxieties also rose in the hard red winter wheat belt after dipping temperatures suggested possible frost damage. Thoughts of a delayed start to spring have surfaced on the never ending winters of the Prairies and Northern Plains. And the cold, wet weather through the Midwest is also causing similar chatter for corn and soybean planting.
Not to mention, there has been plenty of other ‘noise’ as well. The largest topic is the threat of a U.S./China trade war, and soybeans are named a prime candidate for Chinese retaliation. As the conversation toys with ‘will they or won’t they?’, soybean futures have reacted. The deeper the trade conflict the more likely impacts will be felt in the agricultural commodity space. Heightened volatility in energy and stock markets has further fueled uncertainty as well.
Despite the turmoil, prices have not pushed the boundaries that confined us since last summer. However, we have seen sharp moves and dramatic short-term swings unlike anything we’ve experienced in quite some time. Prepare yourself for more price volatility ahead. Although it’s unnerving, it also opens the door for opportunities.