Weather will likely dictate how markets react, a commodity researcher said
By Diego Flammini
Mother Nature’s actions in the coming weeks could be a key factor in how grain markets react.
“There’s an overall wait-and-watch sort of feel in the market,” said Abhinesh Gopal, head of commodity research with Farms.com Risk Management. “We are in a weather market because these summer days are usually make or break for crops.”
Since late June, weather forecasts have been “doing a yo-yo,” Gopal said.
The month of June had hot and dry conditions, and the market received a boost from the U.S. Department of Agriculture’s (USDA’s) June acreage report. But the market started to grow weary as wet forecasts set in.
“Any moves have been dependent on the weather outlook,” he added.
Regardless of the weather, markets may not move much because of the size of the anticipated harvest.
The 2020-21 corn crop is forecasted to be around 16 billion bushels, the USDA said in May.
And even a 1.76 million-ton corn purchase from China in July may not be enough to see corn prices rise.
“That day corn closed higher, but not by much,” Gopal said. Overall, the strong demand over the last few weeks has been supporting crop prices. But the reality is the USDA is expecting a big crop, so the market seems to have priced the worst in.”
In addition, the unknown surrounding COVID-19 remains part of the equation.
Grain markets have figured out how to trade during the pandemic, but everything can change quickly, Gopal said.
“For now, the market is back to trading fundamentals and not COVID fear,” he said. “But if (we) get another round of the virus, markets might react accordingly.”
Producers should continue to monitor the weather for marketing opportunities.
“Stay tuned to the volatile weather market,” Gopal said. “It’s been trending either way a lot and the volatility is far from over. If it’s hot and dry conditions ahead in the short term, the outlook will change.”