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Play Turner’s Take Ag Marketing Podcast Episode 281
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The DOW was down 900 points midday and crude was $5 lower as the market took a “risk-off” approach to possible new covid related shutdowns. The grain markets were up in the overnight but could not fight off the selling in the energy and global equity markets. When the macro market stabilize we expect the grain markets to rally. Make sure you take a listen to this week’s Turner’s Take Podcast!
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Macro Market Meltdown
Stocks sold off today due to concerns of the covid delta varient spreading around the globe. The threat of economic shutdowns brought on the selling and the DOW was down over 900 points today. Crude oil also sold off due to the shutdown threat but OPEC didn’t help their cause either as they announced the end of production cuts by the end of September 2022.
We had talked about being short in energy in Turner’s Take incase of economic shutdowns but ultimately I think this ends up being a buying opportunity. The US and global economies are just getting going again. Any covid related shutdown will just pent up more demand going forward.
Keep in mind when you have 2nd and 3rd reiterations of a crisis or crash, it is rarely as bad as the first time around. If you think back the debt ceiling fights or when the Euro was at risk of collapse, the biggest shock to the system is the first time it happens. As with many things, the sequels never quite pack the same punch as the original.
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Weather models over the weekend trended hotter and drier in the 10-14 and also in the longer term outlooks into August. Problem issues continue to be parts of the western corn belt, northern plains, and Canada.
The images below are from BAMwx.com and weathermodels.com. They show the weekly evaporation rates are about 1″ to 2″ this time of year. They take a look at the predicted weekly rain accumulation. There is just not enough rain in the forecast for the western midwest and northern plains.
Grains & Oilseed
The big debate is if the above average yields in the eastern corn belt are enough to make up for the western corn belt and the northern plains. The constant back and forth in the market is causing trading fatigue amongst all market participants. Weather markets are a marathon, not a sprint, and we probably still have a couple of big events on the horizon. It will take a few weeks for the market to start to get a handle on corn production. The August WASDE and new crop corn yields will be highly anticipated. It could be another four to six weeks before the market has a better idea on national soybean yields.
Moral of the story is to expect more volatility with the bias to the upside. The situation in Canada is dire and the farmers I talk to north of the border are calling is a “100 year drought”. There are not many resting orders in the market (from spec traders, end users, or farmers) so any surprises or new announcements can have outsized market reactions. Once the outside macro markets calm down and stabilize, we could see the CBOT rally. As long as stocks and energy are diving lower it will be difficult for any risk asset to stay in the green.
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About Craig Turner
Craig Turner is a Senior Broker at Daniels Trading, author of Turner’s Take newsletter, and a Contributing Editor for Grain Analyst. Craig is often quoted in the Wall Street Journal, Reuters, Dow Jones Newswire, Corn & Soybean Digest, and also makes appearances on SiriusXM – Rural Radio Channel 80 providing commentary for the Grain and Livestock markets. Craig has also been featured in FutureSource’s Fast Break series, Futures Magazine Online, and INO.com. Mr. Turner has a Bachelors from the Rensselaer Polytechnic Institute (RPI) where he graduated with honors and has worked at the NYSE and Goldman Sachs. While at Goldman, Craig earned his MBA in the NYU Stern executive program. Learn more about Craig Turner.