Grain markets closed sharply lower on Tuesday, causing July futures to give back most of their gains from the last two weeks. According to Joe Vaclavik, weather is putting this market in a downward spiral.
“This past Friday, we had gone home believing the weather was to be dry and temperatures are going to be well above normal,” he explains. “That forecast shifted over the weekend.”
The market was down “hard” on Monday, according to Vaclavik. Tuesday the market was limit down, and CME expanded the corn limit to 40 cents starting Wednesday. “It's still too early to say whether or not we're going to have a good corn crop in this country,” Vaclavik says. “Usually the weather markets don't get started until about this time of year.”
Vaclavik says weather caused the liquidation. “Speculative length in this corn market had become excessive,” he says. “I think that this shift in the weather was kind of a catalyst for some liquidation here this week.”
Today’s rally in the feeder cattle market also influenced the big sell-off in corn, according to Vaclavik. “We usually see kind of a negative correlation there, which means that if we get a big move in the corn market, you're probably gonna see an opposite move in the cattle market, so we're seeing a little bit of that,” he says.
Vaclavik says this market situation might not be over yet. Watch AgDay TV Wednesday morning to get more analysis from Vaclavik or download the MyFarm TV App to watch AgDAy on the go.