Holiday mode dominates the markets this week. It seems that the of the year is rather mundane with thin, volatile trade. This holiday season was extremely slow, and mostly lower trending. Producers have been holding out, waiting for a post-harvest rally, or any rally for that matter, to boost prices closer to break even production costs. Unfortunately, the rally has not been seen. The few days when prices have tried to move higher, it was mostly due to fund short covering, and it was very short lived. Fundamentally speaking, there is a lot of corn and soybeans in the US and the world, with little new demand on the horizon.
Looking ahead, we could be facing a very similar marketing situation as we had a year ago when we had a big crop and no demand. Last year many held out for a rally until July, only to watch storage costs eat up most of the cash price gains. Since this scenario is possible again this year, the question is will we see history repeat, or will the producer give in sooner, opting not to pay the additional storage? This means the next two to three weeks, when most minimum storages comes to an end, will be a very telling time. Board carries aren’t strong enough to cover most storage rates. If commercially stored grain is sold first, that first flush of corn will likely be significant enough to negatively impact both futures and basis.
As for market drivers, the only input on the radar right now is the January crop report, in which the USDA will release the final yields for 2015 crop. Should those yields be reduced for any reason, the market could see that as friendly and move higher, however the lackluster demand should outweigh any yield gyrations.
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CHS – Rochester Grain Team
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