Richard Brock: Watch These Market Fundamentals
Could 2022 offer the same profitable opportunities as 2021? The outlook for corn and soybeans is optimistic thanks to strong demand and potential production shortfalls in South America. Yet headwinds are present. We asked eight analysts to provide their best estimates on price direction and market strategies you can put to use in 2022.
Richard Brock, Brock & Associates
On the bullish side, ethanol production is increasing and ethanol plants are profitable. Also on the positive side is the advancement of renewable diesel. California is requiring cleaner fuel, which has pushed up the demand for both ethanol and renewable diesel.
A negative factor would be a sharp jump in global production. As of mid-January, there was concern over Brazilian soybean production due to dry weather. That has helped support the market. My estimate is that will not last. Supply-driven bullish news is normally short lived.
Two other key fundamentals include China’s purchasing programs, which are strong but lagging the amount of corn and soybeans purchased last year from the U.S. We believe they will be long-term buyers but not like they were 12 months ago.
Another key fundamental is the price of fertilizer and other inputs for this year’s crop. Nitrogen prices have more than doubled. A concern? Yes, but let’s not forget a large share of Midwestern producers applied the majority of their anhydrous last fall. Once nitrogen is down, the acres go to corn.
It all comes down to what fundamental changes mean to the stocks-to-use ratios. As of early January, the ratios for both corn and soybeans were over 10%. History shows a 10% ratio in soybeans creates average prices of $10 per bushel. In corn, a 10% ratio equals $4.70 per bushel. Thus, corn and soybean prices are near the top of the price range.
Read More
Naomi Blohm: Corn and Soybean Market Factors to Watch
Bill Biederman: A Dichotomy of Possibilities
Brian Basting: Market Tools That Turn Uncertainty Into Opportunity
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