Market Commentary for 9/27/24
As more corn is harvested, and more yield reports throughout the Midwest roll in, there are indications the crop size is getting bigger. With what I’m hearing, it wouldn’t surprise me if the USDA raised the yield estimate in each of the next 3 reports. Realistically, the yield upside potential could be above 185 this year.
Be Cautious When Listening to Anyone’s Opinion on Market Direction
Recently a farmer, who is also an end user, called me to ask my opinion on where prices were going. I flipped the question, and asked why he was asking and where HE thought the market was going.
He said he wasn’t sure, but he spoke to a producer in another state who said corn would likely rally 30 cents in the next month and recommended he buy all his winter feed needs now.
I then inquired, “did you ask this other producer what his position was?” He was taken aback by this question and said no. I said, whenever I talk with someone about price direction potential, my first question is, “what is your current position?”
Why?
A farmer’s, or really any market participant’s, position means MUCH more than their words. If I have nothing sold or protected for my 2024 crop, my perspective on market direction will be very different than someone with 100% of their 2024 crop sold or protected. Whether I can substantially profit or lose based on the market’s movement will heavily impact my belief on future market direction. After all, why would anyone with all their crop unpriced or unprotected think the market will go down?
What About Those Who Have No Position?
They too can be heavily influenced by external factors. Market analysts focusing on farm operations, but who have no position themselves, can still be influenced by what they have told their clients to do. Plus, market analysts for end users usually have a different perspective from those that focus primarily on producers.
Analysts can also be influenced by their analyzation method. For instance, they may have a preferred technical strategy or fundamental stat that indicates which direction they should favor.
Grasping for Reasons
The reality is most farmers and market analysts are undersold for this time of year. This has led to what feels like some market participants trying to “will” the market higher by looking for, and reporting on, any reason the market could turn around and go higher.
Examples I’ve seen include:
- ·Comparisons of this market to charts from 10, 20 or 50 years ago
- Seed kernels are too small, or test weights are low
- Bad weather forecasts in South America or the Black Sea
- Interest rates, the value of gold, or the stock market
- China’s economy
- The election
Bottomline
Right now, it’s important to remember most farmers have very little of their 2024 crop sold, and they are looking for anything that will cause the market to rally. Could the market rally 20, 30, or 50 cents in the next month? Absolutely. Will it? I think it’s unlikely, but maybe that is because of my position.
The key for me is having a marketing strategy that takes into consideration either scenario. I’m protected at values above these levels, but I still have upside potential open too. This means I don’t really mind which way the market goes.
I would suggest the next time you ask anyone what direction they think the market will go; first ask them what percent of their position is sold. I can almost guarantee that farmers or analysts with little or nothing sold will not be bearish.
Want to read more by Jon Scheve?
Could The National Yield Be Above 185?
Could The Lows Finally Be In For The Year?
What Crop Should You Store At Harvest?
Comparing Marketing Strategy Performance By Market Cycle
No Marketing Strategy Works Perfectly All The Time
