2021 proved to be a wild ride for commodity markets. China was an explosive buyer of major commodities including corn to start 2021. That buying, combined with the fact there were weather worries in South America and the U.S., provided fuel for the markets in 2021 with prices peaking early.
So, what did market analysts learn in a year like 2021? Mark Gold of StoneX Group and Bob Utterback of Utterback Marketing are both veteran analysts. They say there were a few key lessons that stick out in their mind from last year.
“I think what we learned is the Chinese can move a market very quickly. They were huge buyers in December, January, February and March and ran the markets up. We had kind of a rough spring, and the markets made their highs, I think it was in May and June. And then we backed off substantially as the Chinese buying evaporated,” says Gold.
Gold says nearly a year after China came in with historic corn buys, the situation has flipped, and the market is waiting on big Chinese buys to hit the market again, but it didn’t seem to temper the markets.
“As we closed out 2021, weather was trumping demand,” adds Gold.
For Utterback, it wasn’t just China’s big buys or weather. He thinks there are some macroeconomic issues that will continue to be a theme in 2021.
“I think the influence of the inflation expectation is something to watch,” says Utterback. “We’ve had COVID that has been a tremendous shock to the world economies. And then we had a change in our policy towards energy.”
Utterback says resolutions within the crude oil distribution system is something that won’t be resolved quickly. That’s why Utterback thinks inflation will continue to be a factor impacting markets impacting the economy in 2022.
“The demand side market has been was strong early on, as Mark mentioned about the Chinese they came in, and then they backed off very quickly last year. And now the question is going forward, will the trade policies be as strong or will we start seeing some of the producers of the world start saying, ‘Hey, we can’t let our food prices get out of hand?’” So, we’re going to start protecting our food prices before we do exports, which creates a tremendous amount of uncertainty and volatility in the market,” Utterback adds.
