Corn futures have fallen this year – but by less than soy or wheat. Can this outperformance last? Or will it fuel raised output, and price pressure?
Trying to figure out how the commodities markets are going to move is sort of like trying to herd cats. There are so many different factors involved that sooner or later chaos theory gets involved and no matter how good you are at it everything falls apart.
I really thought corn was going to go down the toilet when the numbers from the 2015 harvest began to come in. We’d had an increase in acreage planted, weather had been decent, yields were quite good, the market seemed poised to drop significantly… I wouldn’t have been surprised if the price fell to under $3, in the 2.8 to 3.0 range.
And, of course, I was wrong. Prices remained remarkably stable even as the harvest concluded with near record numbers.
Now everyone is trying to figure out what’s going to happen in 2016. And while there are the usual doom and gloom purveyors out there, along with the usual eternal optimists, if you ignore the extremes everyone else is indicating that corn pretty much isn’t going to move anywhere in the near future. Barring some kind of extreme weather event or something else that causes wide spread issues, the people who should know this stuff like Rabobank believe prices are going to remain fairly stable. Rabobank thinks it could hit 4.20 in the second quarter, but by the third quarter it will be dropping down to around what it is now.
Looking at the predicted acreage figures, long range weather predictions (which are pretty much a joke if you’re honest) and everything else, I’d agree with Rabobank.
There seems to be no drastic increase in demand in the works. Considering how low oil prices have dropped, there certainly isn’t an increased demand for ethanol. The only reason that industry is even around any more is because of government mandates. A lot of people, engine makers especially, would like to see ethanol just go away. (we just bought a chain saw and it’s accompanied with dire warning about running any kind of ethanol blended fuel in it. My new car… it doesn’t come right out and say ethanol blended fuel will kill it, but it comes damned close)
I don’t have a lot of money tied up in commodities so I don’t really have a horse in this race. I watch the markets mostly for the entertainment value (some of these people are, well, loopy to put it politely). So don’t take this as advice or a recommendation. Frankly I think you’re nuts if you invest more than a bit of mad money in the commodities markets.
It’s fun to watch though and try to figure out what’s going on.