From rate hikes to global recession fears to pathetic exports, many issues softened the grain markets this week.
December corn prices were relatively flat, and November soybeans down 22¢ for the week ending Sept. 23. Wheat prices were up 10¢ to nearly 20¢.
“Many times, we say it is more important how the markets closes versus how they trade during the day,” says Jamie Wasemiller with the Gulke Group. “Although the Fed’s 75-basis points rate hike was announced midweek it appears that it took a few days before the market decided to sell off with no bias as it most sectors have been negatively affected except for the U.S. dollar, which typically is a negative to commodities.”
The market pretty much had the 75-basis point hike built in, he says. But, the dialogue points to additional rate hikes down the road which is a heavy burden to deal with.,
“Right now, these economic problems are not just local,” Wasemiller says. “Along with global recession fears it just feels that markets are tired of fighting bearish factors. It is very hard to think of anyone wanting to be long going into a weekend these days.”
On the commodity side, harvest is picking up in the U.S. and other countries. That will start to answer some of the supply-side market questions, he says.
“If I am looking for a silver lining, there is a significant amount of money in long funds which hopefully can help to temper the commodity drop off,” Wasemiller says. “With that being said, recession fears right at harvest time could be tricky.”
Dismal Export Numbers
Wasemiller says the USDA showed low exports on Thursday.
“On the U.S. front, we are uncompetitive in the corn and wheat market and our window to sell soybeans competitively is small,” he says. “Plus, our dollar continues to scream higher while some other nation’s currencies are seeing how low they can go.”
Consider Margin Protection Insurance
On the crop insurance front, Wasemiller reminds farmers the deadline is Sept. 30 for electing margin protection crop insurance.
“It is an area-based plan that helps to cover price risk, yield risk as well as input cost risks,” he says. “If you are of the mind that input costs are going to surge higher between now and this spring this might be something to consider.”
Additionally, he says, if you believe that prices are going to decline between now and when we set our spring prices for corn, soybeans and spring wheat look into insurance products that let you lock in today’s prices as an additional opportunity to increase your revenue guarantee.
“If you do this then you get the higher of today’s prices, your spring price or the harvest price,” Wasemiller says.
Check the latest market prices in AgWeb’s Commodity Markets Center.
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