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“Bullish WASDE may not take futures prices wildly higher”

Photo courtesy of AgMarket

Grain markets strengthened during the first week of 2021. A market analyst shares his expectations for commodity prices, especially as we await two Department of Agriculture reports.

Grain futures this week pushed higher, despite a quick downturn Wednesday night into Thursday morning. Matt Bennett, founding partner of Ag Market, makes two observances about this week’s market action.

“There’s no question that a lot of folks want to own this market. Second of all, (with) the funds being long, it seems to me that they wanted to stay in those positions, so most of these dips continue to get bought,” Bennett says.

Moving forward, the U.S. Department of Agriculture will release its final Crop Production numbers, as well as its monthly World Agricultural Supply and Demand Estimates report. Analysts are calling for a bullish report, but it’s going to take a “super bullish report to keep the ball rolling,” adds Bennett.

“What are my expectations?,” Bennett asks. “Whenever the USDA drops yield two out of three months, in the last months before the January report, historically we’ve seen another yield cut, as far as corn is concerned. The average cut is one-point-six bushels. At Ag Market, we’re expecting to see the yields drop back. We do think exports could creep up for corn and beans, and we expect to see a tightening situation.”

Ag Market believes “good prices, relative to the last few years,” are here to stay and encourage producers to manage risk, as prices move higher.

“If I was a producer, I would take some risk off the table. As we move higher, at least set floors under the market,” Bennett says. “Right now you can buy a put option and have a better net price than what you have probably seen in the last five or six years, with either corn or beans.”