Volatility Creates Opportunity to Close Out 2016

November 12, 2016 05:00 AM
Volatility Creates Opportunity to Close Out 2016

From USDA hitting the corn and soybean market hard this week with a bump in the national projected yield, to the outcome of the election sparking a sell-off and recovery in the U.S. stock market, volatility has been the name of the game this week in commodities.

“It's obviously been a boring ride leading up to these last couple days, and just when we think there's no news, we get a whole bunch of news dumped on our plate,” said Jarod Creed, of Gavilon on U.S. Farm Report this weekend. “I've always been a believer that volatility creates opportunity.”

Part of the volatility is due to uncertainty of the U.S. election results. Trump’s victory caught analysts and traders by surprise, forcing repositioning after the election results were final. The focus is now on what a Trump administration means to both monetary policy and agriculture; that shift will continue to be a market mover in the coming months. However, South America is another wild card that could impact prices moving forward.

“Now that the elections are past us, we don't know what trade policies are to be going forward, but what we do know is there's going be a significant risk with the South American growing season,” said Ted Seifried, Zaner Ag Hedge. “So, between now and the end December, I think prices are going to hang in there fairly well.”

Both Seifried and Creed suggest keeping an eye on South American weather. Any production hiccups there could impact prices here at home. Even with that possibility, both analysts say a weather issue isn’t something to bank on.

“I think we should be making sales between now and the end of December,” said Seifried.  “But then if there is a South American weather issue, be quick to reown those bushels if you see that need.”

“There's certainly a lot of risk out there in today's market, given any avoidance of any weather issues in South America, we need to look at '17 numbers right now,” said Creed.

He knows producers are having tough conversations with everyone from bankers to input providers. He says these conversations will turn into decisions that should focus on 2017. 

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