With plenty of grain liquidation and thinning volumes, any volatility could shake out as markets head toward the end of 2022.
There certainly remains some volatility abroad, as Randy Martinson of Martinson Ag Risk Management and Don Wick of Red River Farm Network discussed during the Agweek Market Wrap on Friday, December 16.
“This market could still see some pretty volatile action if something were to happen,” Martinson said.
Markets continue to react to news of Russian bombings that hit energy centers and damaged ports in Ukraine.
“We could see fireworks next week,” Martinson said. “No pun intended.
Another consistent performer these days is the Federal Reserve’s recent half-percent interest rate hike. While that amount was expected, investors are now thinking of another three-quarter, or 1%, rate hike just before 2023. That’s not what the market wanted to hear, Martinson said.
Wick asked what the increase meant for agricultural commodities.
Martinson said what you see at the end of the year is tax planning and a lot of liquidation.
“They want to go in with very small positions so they can start fresh at the beginning of the year. That’s really what we’re seeing right now,” Martinson explained.
While the weather has been no picnic for the upper Midwest as it deals with snowstorms, rain is in the forecast for South America and Argentina.
Martinson said the moisture won’t do much for wheat or corn. But with soybeans, they think that could be problematic because the beans are still being planted.
“I think we’ve seen some pretty good damage and it’s going to be hard to reverse some of that,” Martinson said.
As traders look to the end of the year and try to balance their positions, Martinson said farmers are also likely to move grain. He added that winter weather could affect markets locally as end users may experience shortages of some products.
Wick and Martinson noted that the pork and beef cuts were “extremely erratic”.
Martinson said some of that comes from China’s talk of easing COVID-19 restrictions. It may also contribute to an increase in the interest rate.
“That means we should be able to see a little bit more demand after the first of the year,” Martinson said.
Martinson said market analysts will be watching the war between Russia and Ukraine, China’s buying and the weather in Argentina to see what changes they might bring.
He suggests that producers look at what they have left to sell and come up with a plan for some sales for the first year of the year.
(The Agweek Market Wrap is sponsored by Gateway Building Systems.)
