The first week of January was in many ways a waiting game, as the trade awaited the Jan. 10 USDA report. But there were plenty of other items to influence markets.
The top of the list is the crop condition in South America, according to Karl Setzer, a market analyst with Agri-Visor. While Argentina has gotten rain, Brazil remains dry. That could influence yields in Brazil and is an item worth watching, Setzer says.
The recent developments in the Middle East also have the markets on edge. The threat of war is rarely good for markets, Setzer says. The threat in the Middle East could especially impact the wheat market.
“I’m very concerned,” Setzer says of the wheat situation.
If there is a plus side to any of that international uncertainty, it might be that sometimes investors leave the stock market to invest in commodities when there is economic instability.
There are also some concerns about the heat and wildfires in Australia. That could impact cotton or other commodities, Setzer says.
Closer to home, the United States and China are scheduled to sign “phase one” of their trade agreement on Jan. 15. That should be good news, although Setzer says there is some uncertainty in the trade because few details have been released about the deal and because the details that have been released primarily seem to be about dollar amounts of items to be bought rather than about reducing trade barriers. Until more is known, it is difficult to know how the trade will react, he says.
For farmers, Setzer says the best strategy right now would likely be to look at the long-term picture. That could mean marketing both some of the 2019 crop and the 2020 crop. It might even be worth marketing a very small percentage of 2021 bushels.
He says now is probably the time to be patient about any large sales, and to instead reward rallies. The good news is that the market appears to have set a floor and there is more upside potential than downside risk.