With a market that suddenly rallies on soundbites and swiftly falls after technical consideration, farmers have but one choice: Be ready for the rally.
The most recent example is last week’s soybean rally that quickly pushed over the $11 mark on news of a trade deal with China and then this week’s price slide after traders evaluated the situation.
The market seems to be "looking for a little bit of clarity because we are kind of getting some mixed messaging out of Washington," AgMarket.Net Chief Operating Officer Jim McCormick says on Ag Marketing IQ In Depth. “The fact of the matter is we have yet to hear any comments from China. And for me, honestly, that's a little bit unnerving."
Part of the uncertainty stems from conflicting statements about purchase commitments:
- U.S. Treasury Secretary Scott Bessent indicated China committed to buy 12 million metric tons through year-end plus 25 MMT over three years.
- The White House claims China will buy 12 MMT over the next two months.
This discrepancy is significant because the U.S. has already shipped 5.9 MMT to China this calendar year. If it’s a calendar year deal, that would leave only 6.1 MMT left to purchase by year-end.
Either way, the deal falls significantly short of the China-U.S. highwater mark of 828 million bushels of soybeans.
Though the market rallied on last week’s news, the fundamental outlook remains challenging due to global competition and large carryout projections, which were estimated around 300 million bushels prior to the government shutdown. The next crop report and World Agricultural Supply and Demand Estimates are expected from USDA on Nov. 14.
In the meantime, China bought more soybeans – at a lower price – from Brazil. As a seemingly direct result, oilseed suffered double-digit losses on Tuesday. Corn also slipped slightly, and wheat drifted up.
Manage your risk
With the market taking hard, unexpected bounces, McCormick says farmers need to manage risk.
"The key right now is to know your break-evens and get the orders working in the market when it's profitable, not when you have to," McCormick says. “When you have that opportunity to market grain at profitable levels, we're going to tell you to go ahead and take advantage of it.”
With those large global soybean supplies and intense competition from South America, the long-time trader recommends farmers and traders listen closely to the narrative and break for a profit goal whenever a lane opens.
“The funds we trade right now – they're a different beast than they were when I started this business 20-30 years ago,” McCormick says. “It is all about momentum – momentum up, momentum down. … Anything can change in a heartbeat, and you see how quick it moves.”
Hear more from McCormick in this week’s Ag Marketing IQ In Depth.