Is Low Volatility, Slow Growth Creating a Barbecue Market?

October 7, 2017 05:00 AM

The livestock side of the CME has seen  more volatility the past year than the grain and oilseed sector. As corn prices remain stagnant, volatility within the market is hovering around record lows.

With little commodity price movement, U.S. Farm Report analyst Craig VanDyke of Top Third Ag Marketing says that’s creating a lot of questions among farmers, in search of what to do with their unsold grain and trying to navigate where prices are heading. 

“There are a lot of questions of, ‘Should I sell corn? Should I store corn? Should I sell beans? Should I store beans?’” said VanDyke.

While there’s not one answer, he says to watch the price spreads closely on the technical side.  

“If we start to see spreads narrow - then maybe we have a little bit of signs of life, but if you store grain, you need to capture the carry.” said VanDyke. “The only way for a producer to capture the carry is be willing to contract the grain out to when he or she plans on delivering it.”

Chris Narayanan, CEO of GA Capital says today’s market says the low volatility market is creating what he calls a “barbecue market.”

“It’s low and slow, with slow growth and low volatility,” he said. “It used to be because of low interest rates people were pouring money into the stock market and then we started seeing earnings rise, and then we started seeing top line revenue rise. And so that continues to go.”

Narayanan says that part of the market is something to watch, as it’s inevitable the market will flip.

“Eventually that's going to reverse itself, we're going to start seeing a reallocation of assets, so be mindful of what's going on and pay attention,” he said.

Watch Narayanan and VanDyke break down the macro picture of today’s markets on U.S. Farm Report this week. 

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