To date, January has been fantastic for the bulls.
USDA gave the bulls some much-needed ammunition to drive the market higher in the face of uncertainty in the agricultural world. President Trump is now in office, and the last time he held the position, his trade wars and tariffs negatively impacted agriculture.
As this second term starts, Trump is seeking a vision on trade but is not likely to impose tariffs right away. He is also evaluating trade relationships with China, Canada, and Mexico. The question lingering on producers’ minds is: “Now what?”
Politics aside, what factors could impact the marketplace going forward?
South American weather
With strong demand and smaller ending stocks in the United States, South American weather is increasingly important as any production issues could positively impact prices as world stocks shrink.
According to the National Oceanic and Atmospheric Administration, La Nina became official in December 2024. La Nina causes excessive rains in certain areas of South America while causing drought in others. Signs of La Nina are present.
- Central areas of Brazil, which are on the cusp of harvest, are excessively wet.
- Southern Brazil is dry.
- Argentina is in drought across the country, particularly in the southern regions.
So far, private estimates have not significantly adjusted the Brazilian crop. But yield estimates are beginning to trend lower in Argentina.
Managed money goes long
Managed money has been on an impressive buying spree lately. According to the latest CFTC data released on Jan. 17, Managed money in the Futures Only category held a 292,163 long position in corn. This compares with the record short position of -356,415 contracts seen last July. In a little over six months, Managed money changed their position by 648,578 contracts—over 3.2 billion bushels of corn.
The latest report also shows a buying spree in soybeans, with managed money reported to be long 58,327 contracts compared to the record short of -183,145 last summer. This equates to a net position change of 241,472 contracts or 1.2 billion bushels. For reference, the record long on corn was back in March 2011, when managed money held 409,444 contracts. In soybeans, the record long was 240,937 contracts in May 2012.
Can the managed money crowd continue to aggressively buy and approach record-long positions, or has the upward momentum stalled? Without a definitive answer, what is the best way to proceed and take the emotion out of marketing decisions?
Option strategies are available
Many producers sold into the rally, particularly on corn, and fear missing out if the market uptrend continues. With a long way to go until the next U.S. crop, if the market drops, consider buying calls as we enter the U.S. growing season. This strategy allows participation in a potential market rally.
Conversely, bushels remain open and carry downside risk. Look to buy puts on unsold grain bushels. Buying a put establishes a price floor while maintaining the flexibility to market at higher levels if the opportunity arises.
While it’s good to feel optimistic about the markets, conditions can change rapidly. Continue to be prudent and diligent in your marketing strategy, as volatility has been significant so far in 2025.
If you have questions about these insights or need help developing your marketing strategy, contact me directly at 314-626-4019 or reach out to the AgMarket.Net team at 844-4AG-MRKT.
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