What Caused Monday's Market Dip?

June 21, 2016 05:22 AM
 
What Caused Monday's Market Dip?

Commodity prices have been on a pretty steady climb since April, but the road still had a few bumps along the way. The latest rough patch happened Monday, June 20, when corn and soybean futures each finished the day down around 15 cents. What happened?

Paul Georgy, president/CEO of Allendale, Inc., looked at a number of factors that could be in play, including:

  1. A weather forecast that calls for cooler, wetter weather across the Midwest – much of which has been in need of a drink this June.
  2. The latest USDA crop conditions report. Corn’s good-to-excellent numbers are currently around 75%, while soybean is not far behind at 73%.
  3. Argentina’s corn acreage, which could spike 20% for the 2016-17 growing season.
  4. The upcoming Brexit vote on Thursday, June 23, which determines if the United Kingdom stays or leaves the EU. This is causing increased margin requirements for several currency and metals contracts.

Joe Vaclavik, founder and president of Standard Grain, Inc., says that of all the factors affecting grain markets right now, weather is having the single largest impact.

“Make no mistake about it – this was a shift in the weather forecasts over the weekend,” he says. “On Friday afternoon, we had been led to believe that this week was going to be very hot and dry for a big portion of the Corn Belt. Over the weekend, forecasts shifted. We’re now looking at a pretty good chunk of rain for most major corn-growing areas during the next few days.”

Alan Brugler, president of Brugler Marketing & Management, says crop conditions and yield estimates changes as quickly as the weather forecast – and these changes can be frequent.

You get pricing opportunities that sometimes turn out to be well above what the supply/demand situation ultimately dictates,” he notes. “In other situations, a fall drought like ’83 or an early freeze provide the price juice. Don’t get distracted by all the spraying and irrigation and hay baling and your kids showing animals at the county fair.”

Want more grain market commentary? Visit AgWeb’s marketing blogs page for a daily dose of updated analysis from a variety of market experts.

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Comments

 
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Mark C. Daggy
Humboldt, IA
6/22/2016 10:53 PM
 

  My advise to all grain farmers....is don't blink....ignore the USDA, the Coops and the speculators manipulative "bull" and hold all corn for $6. Begin selling at $6 and sell until corn drops below $5, and shut off all sales until corn goes back above $6. Thus there is a window to sell corn into, removing the pressure to jump the gun when a target price is created when selling. Resist the temptation to plant fence row to fence, resist the temptation to pouring nitrogen into a crop and resist the temptation to press for ever increasing yields. Work smarter not harder.

 
 
Mark C. Daggy
Humboldt, IA
6/22/2016 11:34 PM
 

  Was reading another story on AgWeb which stated the following: "Wholesale spot-prices for corn in Campinas, Sao Paulo, dropped to 48.40 reais per bag ($6 bushel) on Monday, down 10 percent from a record high on June 2 and the lowest since April 25." Corn is selling for $6/bushel in an economic poor country Brazil. The "BS" spread by grain buyers, is they will import corn from Brazil....if prices continue to rise. They need to tell us how they pay $6/bushel for corn in Brazil, ship and truck it into the Midwest and it cash flows? Really? just more fuzzy math from computer farmers. The selling window system of starting corn selling at $6 and shut off all sales when prices drop below $5 and start the cycle all over again....will work if all grain farmers just follow it. Much like in the movie Braveheart, hold all sales until you see the whites of the grain buyers eyes.

 
 
Larry Mkry
Corpus Christi, TX
6/21/2016 08:17 AM
 

  I am a grain sorghum, corn, and cotton producer.

 
 

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