There are convincing arguments to be made on grain markets moving to the up and to the down side. Right now, the bulls seem to have a slight edge, but all that could change quickly, says Neil Townsend of FarmLink Marketing Solutions and Grainfox.
A general lack of big news has kept markets in a sideways trend, but there are supply-side factors that could pressure markets which finished off January slightly bullish. Of note, Brazil has a big crop coming, and that’s not likely great news for soybeans. Even still, there’s not a huge sense of urgency either up or down, Townsend says.
Moving from most bearish to verging on bullish, Townsend breaks down some factors from soybeans, corn and wheat. Beans, he says, face the toughest fundamentals because of the aforementioned Brazil supply, but the U.S. still needs to re-up stocks (and there might be demand that arrives, i.e. China) to prop up markets. In short, the 2023 crop still counts in the U.S.
There’s more bullish potential in corn than soy, and a more interesting story, too. If the U.S. returns to a mid-180s average yield, maybe not, but if 2023 delivers another 176 bu/ac year, stocks would dip very low.
Perhaps surprising, humble wheat may have the strongest chance of a bull run. Townsend says while wheat hasn’t sustained the Russian/Ukraine war premium, maybe we’re on the verge of a deferred war premium. Also, there are conditions in a few wheat growing areas that, so far, are not conducive to big supply.
“I wouldn’t sleep on wheat, especially in relation to the other two,” Townsend says.
Now, what about the bears? Bears always start with, “We’re in a high-priced environment. High prices cure high prices.” The bears may have more ammo, Townsend says, but perhaps only because it’s hard to pencil in a key weather disaster with certainty.
Check out the full conversation between Neil Townsend and RealAg Radio host Shaun Haney, below:
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