The commodity market cool-off could be here for the longer term, says analyst


If you look at the commodity markets as of Tuesday, it’s a bit of a mixed bag, but for the most part — there’s no green on the screen.

Jim McCormick of AgMarket.Net joined RealAg Radio host Shaun Haney to discuss what is going on, and where this uncertainty is coming from.

As you can well imagine, there’s a few things going on that are causing this, says McCormick, including some concern surrounding the cash market.

“Yesterday, the value of grain down at the gulf kind of collapsed across the board, and a lot of weakening at the basis,” he explains. “So I think there’s a little bit of concern of demand — export demand specifically — for U.S. products, as Brazil continues to sell our products a little bit cheaper.”

That, of course is at the micro level. At the macro level, or the international front, all eyes and ears are directed towards the  future of the Black Sea grain deal going forward — as the expiration date of May 18th looms closer.

“I’m in the camp personally that I think they’ll shut it down. I think Putin is going to, at least temporarily, wait and see how hard the G7 comes after him. And then if they come after him hard without any sanctions relief, I think he’s going to try to squeeze the world a little bit.

“And now we’re going to see how long it actually is, is it days, two days, is it a week, or a month? The longer it goes on, the more nerving it will probably be for the world’s buyers,” explains McCormick. (Story continues below interview) 

In general, we are no longer really facing the bulls in the market, says McCormick, but rather the bears. With looking at different factors both in the geopolitical and local scene, it’s a stocks building market, and McCormick says if the market is going to pay you storage, most likely you’re going to fall store grain into the spring and summer.

“It’s just the cycle of agriculture. When you think about what happens, we’ve had a very tight supply in the United States, we’ve had sites buy around the world, and that has driven the prices to astronomically historically high levels,” he explains. “What happens, is the world responded to these supply driven rallies by essentially increasing supply… In general, if you look at what the government’s suggesting, the world carry outs are starting to grow. So we’re moving into a long-term bear market.”

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