With harvest well underway, or even finished for some, markets continue to be susceptible to global events, but focus is now turning to what the actual yield numbers are as crops come off.
Weighing in on the topic is Brian Voth, president of intetlliFARM, and he says he’s skeptical of the demand that is being reflected on the current balance sheets.
“There’s a lot of commodities that have record or near record demand estimates penciled in for this year. Yet historically, when we’ve had other timeframes of high commodity prices, the year we come off those highs, demand tends to actually drop, not increase,” explains Voth. “And just the fact of having record high or near record high prices, and then expecting demand to increase flies in the face of everything economics you could ever say. And so I’m a little bit skeptical about that, especially given the fact that demand is not showing up in the market, at the rate we need to actually get to some of these levels”.
Previously, in regards to exports to China, the focus has been on how much they will actually take. Voth takes this one step further and states that outside of their actual requirements, it’s important to realize that not all of those exports will come from the U.S., and South America will likely be a large competitor for that market. Therefore, even if their export numbers come in strong, the North American market may still only see a small, or less-than-expected, piece of the pie.
In addition to soybeans, corn is another commodity that has a lot of people’s attention and at first glance, the balance sheets are showing to be very tight.
“It is tight when you pencil in the demand that they’re using right now. But again, that kind of flies in the face of economics, high prices are designed to curb demand, not encourage it. So I’m a little bit skeptical,” says Voth.
Although balance sheets are a tool, they are just one source to be looked at when trying to determine where the market is going and Voth urges producers to pay more attention to the actual market values over the balance sheets as the balance sheets are – or can be – adjusted on a monthly basis to more accurately reflect the actuality of yields and markets.
“There’s some people are like, well, the balance sheets are really tight. So clearly prices have to go back up. And I’m sitting here waiting, I’m going to see in two, three, four or five months from now, what changes are going to get made on these balance sheets that are actually going to justify where prices are at by now,” says Voth. “The biggest thing to keep in mind is the market trades in real time. So if it looks like things should be supported and prices should be going up based on the balance sheet and prices are going down instead, pay a lot of attention to things like that. Because ultimately, you’re probably going to see some revisions to those balance sheets in the coming months”.
In the full interview below, RealAg Radio host, Shaun Haney and Voth also discuss why he’s less concerned when it comes to the balance sheets on wheat and canola and why he’s not surprised producers who answered our poll question, are stating that oats is the crop they’ll be decreasing acres on next year.
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