Growing grain anticipation
Following the historic drought recorded this past summer, anticipation is mounting as to how the grain markets will perform in 2013. “[The drought] is one of those factors that from a pure fundamental perspective should lead to good underlying support in the markets. That’s sort of where the market for corn in particular is being caught off guard by this push of weakness we’ve seen recently,” says Randy Mittelstaedt, vice president , research for R.J. O’Brien & Associates.
Mittelstaedt says two things are happening in the grains complex. “We have a focus on very negative demand for U.S. corn, which has been the overriding fundamental for the last couple of months,” he says. “And, we have a situation in soybeans that is just the opposite, where we have phenomenal demand at current price levels that is being tempered by what is looking like a (possible) massive South American crop. We’re kind of at differing ends of focus between corn and beans.”
In both corn and soybeans, assuming normal weather, he expects to see significant increases in production, although he doubts demand will increase with that production. “Anytime you’re coming off a historic situation like we are this year with the drought, the longer-term outlook has to be to the downside in the coming year,” he says.
At the moment, Mittelstaedt says new-crop corn could see $5.00 per bushel and maybe lower, and soybeans should return to the $12 handle in the November contract, with the caveat of with normal weather.
In the short-term, though, Mittelstaedt says to watch the Jan. 11 WASDE (World Agricultural Supply and Demand Estimates) report from the U.S. Department of Agriculture. “There is no more important set of numbers for the grain market than those Jan. 11 numbers. If we get a bullish surprise on corn stocks, then all this negative talk goes away for the time being,” he says.