As farmers across the country prepare for planting, many wonder where the market could go this spring. Could the grain markets rally again? Allendale's Bill Biedermann told “AgDay” host Clinton Griffiths that a rally is possibility, depending on what happens with inflation and weather.
Why? Because the market appears to have finally reached a low point. “I think the real reason the market has seemed to bottom is that the funds were massively short," Biedermann said. “But the market wasn’t going to there to reward them, so they weren’t getting a return on their investment.”
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According to Biedermann, the funds trade in parallel with what the Federal Reserve says. Up until its recent announcement, the Fed was deflating the market by raising the dollar, he explained.
Now the dollar is now going down, and the markets are in more of an inflationary situation. “Fuel and food always leads inflation or deflation,” Biedermann said.
If the market is ready to rally, why is everything so bearish? “I think it’s because the funds are getting in a position to take advantage of an inflation push,” he explained. “It won’t go forever unless there’s a weather problem, but it will help us.”
As always, weather remains a key factor in grain market movements and supply expectations. The flooding and replanting happening in the South could be friendly to prices if some of that acreage is taken out of corn, Biedermann explained. However, that same weather could push up the already-high levels of soybean carryover.