Markets Now with Tyne Morgan: Is the Great Grain Rally Over?

After corn and soybean prices soared last week once the USDA’s WASDE report was released, grains and oilseeds seem to have taken a different path this week. Right out of the gate Monday night and into Tuesday, soybean prices were down double digits.

Bob Utterback of Utterback Marketing says most of that sell-off was due to South America seeing some rain.

“We came into last Thursday and Friday, the market had had an extensive rally, it was needing a little break. And with the weather and the rains coming into the Argentina and Brazil, it took away some of the anxiety of the market.”

The rains sparked a sharp selloff. And after the sharp rally over the past month, Utterback says the market has now stabilized.

“I think we're now into the point where the bulls and bear are balanced,” says Utterback. “Now we're waiting for further developments of seasonally whether harvest is going to be impacted that much in South America. From the reports I'm getting on the ground, the farmers are not as concerned about the crop as much as the writers and the United States.”

Utterback says the real concern will be with U.S. weather and could have a big impact on the markets in the spring and summer. That’s why he doesn’t think this rally is finished.

“I think this is a completely different scenario, dating clear back into the 70s; you might relate it to the Russian wheat purchase deal when it was basically a demand event. This has been a demand-driven bull market up to this point. And now we still have the weather scare markets of the summer to go through when implied volatilities in the options explode, and the cash to go premium.”

As outside money poured into the grains and oilseeds, it seemed to exit livestock markets. Senior animal protein analyst Don Close thinks that’s part of the reason livestock markets haven’t seen as much volatility as of late.

“The big differences is we have not seen the seasonal escalation in open interest in the live cattle contracts that we normally would see,” says Close. “And I think if grain prices reach some kind of intermediate plateau, we'll likely see some of that money come out of the grain pits and work its way over to the livestock. So as those open interest positions, those funds positions increase, I think it could give additional off to the futures market.”

Close talked about counter-seasonal prices for livestock this year and if cattle producers can still see the best pricing opportunities in the second half of 2021. Watch the complete U.S. Farm Report marketing roundtable.