The commodity markets finished the month of May with more volatility. Wild swings in the corn and soybean market carried throughout the week, as analysts say weather, China and fund selling were the main drivers.
“I think weather was certainly a big part of it,” says Chip Nellinger of Blue Reef Agri-Marketing. “I think there’s been just enough rain in areas of the Corn Belt, particularly some of the drier areas of the western Corn Belt that have received some beneficial rainfall over the last week.”
Nellinger says rumors China canceled shipments, but then also looked to book more purchases, also rippled through the corn market. However, China and weather weren’t the only factors this week, he adds.
“I think at the heart of it, really what you saw was a lot of end of the month profit taken by the funds,” says Nellinger. “Funds were massive sellers of corn earlier this week, and since this rally began, the first really big liquidation that we’ve seen from the funds. And then by Thursday morning, not only did we not see any confirmations of cancellations, there were rumors that they were snooping around to actually buy some old crop corn and some more new crop corn. So, the demand base looks like it’s still there.”
Nellinger says as the market is greeted by June next week, weather will start having an even bigger impact on the markets.
“I think we’re not trading the weather volatility yet,” says Chip Nellinger of Blue Reef Agri-marketing. “It’s wildly volatile here, with 60 cent swings in corn and beans in a little more than 24 hours. And I think that’s just a sign of things to come that we need to be really mentally prepared for come June, July and August.”
John Payne, author of “This Week in Grains and Oilseeds,” says the rains this week did calm some of the drought and production problem talk in the market.
“I think the market is acting like it’s perfect in the United States,” says Payne. “Looking across the majority of the ‘I States’, it’d be tough to find an area that is too dry or too wet. I think it’s kind of been just perfect. Now you go to northwest Iowa, maybe concerning there too much drought, certainly the southeast over the next couple of weeks will be dry. But at this point in time, I really look at acreage more than anything. And yes, the Crop Progress shows corn planting is 90% complete, but the areas that really are going to be dragging are Kansas. I think they’re number six total in production. And in a year where we need to be running on all cylinders, you know, if they would lose 2 million acres, and maybe those acres go to beans anyway, I think that’s where the slight concern can pop up.”
Payne also thinks weather issues aren’t a major market force right now.
“I don’t think there’s any weather priced in the market,” he says. “And I think looking at the deferred contract, specifically December 22 corn that broke 70 cents now from where we were just three weeks ago, I think that kind of market here is leveled out. And I think that’s kind of told us that we don’t need to be selling this market yet, as far as getting a huge discount.”
