One of the biggest factors that has given legs to the current rally in Chicago futures is the fact it is more demand driven, rather than supply or weather related, according to Randy Martinson, a North Dakota-based market analyst.
Typically, when a weather problem threatens the supply side, the bulk of the rally is over within five to 10 days or perhaps two weeks, Martinson said as part of MGEX-sponsored crop call Tuesday. But when the source of market strength is coming from heavy demand, the associated rallies tend to be longer lasting, he said.
Although the dryness in South America that is threatening corn and soybean crops in both Argentina and Brazil has certainly contributed to the market gains, Martinson said China’s voracious import appetite and the fact that soybean supplies in Brazil and Argentina have tightened considerably – to the point where Brazil has actually had to import soybeans to augment its domestic supply – are big reasons for the strength.
As such, Martinson said the current rally may end up lasting until new-crop South American soybeans start hitting the international market. Harvesting is underway in parts of Brazil now, but the bulk of the 2020-21 crop is not expected be off the fields, loaded on ships and off to eager buyers until at least February.
“I do think we’ve got a chance to see this extend a little bit longer,” he said. “But I do expect to see a break at some point.”
However, after some relaxing in the market as the South American harvest ramps up, Martinson said he is expecting some strength to return closer to the spring, when corn and soybeans begin to battle in earnest for 2021 acres.
Corn, wheat, and soybean futures have been pointed generally higher since about the beginning of December, with all reaching multi-year highs.
Source: DePutter Publishing Ltd.
Information contained herein is believed to be accurate but is not guaranteed by the parties providing it. Syngenta, DePutter Publishing Ltd. and their information sources assume no responsibility or liability for any action taken as a result of any information or advice contained in these reports, and any action taken is solely at the liability and responsibility of the user.