The rare occurrence of a downtrend in supply and an uptrend in demand put the grain markets on an upward trend to close out 2020. For 2021, be prepared for a good old-fashioned acreage battle. In response, create a disciplined marketing game plan. We asked eight analysts to provide their best estimates on price direction and market strategies you can employ in 2021. Here is one of eight.
Alan Brugler, Brugler Marketing & Management
In 2021, I’m watching the ability of Brazilian and U.S. producers to expand production and rebuild global stocks. If successful, prices will revert to the mean. If there are major droughts, prices can go a lot higher. We also expect price rationing to result in downward revisions on use.
In the best scenario, the COVID-19 vaccination campaigns are successful and pent-up demand drives a sharp economic recovery and strong food demand. Tighter stocks-to-use ratios in 2021 also support higher grain price, but a big 2021 crop in the U.S. could quickly take us back down. Loss of Chinese demand due to political changes is a big concern given current reliance on their ag buying.
With tighter stocks-to-use ratios, opportunities should exist well above realistic (not pie-in-the-sky) breakevens. Usually, folks are bulled up then and have trouble pulling the trigger. When bullish news fails to move prices higher, it is time to sell. The lesson of 2020 is you never know for sure, so spaced selling is rational.
Due to strong basis levels, basis contracts and cash sale/reown strategies are attractive. Earning carry will be tough until supply expands.
Have your adviser compute reasonable 12-month price targets given the latest fundamental and technical information. Get busy selling when we’re in the top 20% of that range. Try not to be penny wise and pound foolish.
Read More
Bill Biedermann: Grain Demand Curves Have Shifted
Brian Basting: Lock in A Floor, Maintain Flexibility
Naomi Blohm: Watch Global Energy Policies
Gain more grain marketing insights at the 2021 Top Producer Summit. Register now!
Disclaimer: This material has been prepared by a sales or trading employee or agent of these analysts and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions and agree that you are not, and will not, rely solely on this communication in making trading decisions. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that these analysts believe are reliable. Such information is not guaranteed to be accurate or complete, and it should not be relied upon as such. Trading advice reflects good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice provided will result in profitable trades.
