Talk about a trifecta: Corn, soybeans and wheat futures prices all finished Tuesday with double-digit gains. At one point the July corn futures contract topped $7 while July soybeans were near $15.40.
“Right now, we’re in a demand bull market that is continually having world supply problems,” says Tommy Grisafi of Advance Trading, of Tuesday’s price action. “It’s probably the most dynamic market I’ve ever traded in my life while trying to help people manage risk.”
Watch his full comments in the video above.
Grisafi says dryness concerns in South America and in the U.S. combined with a surge in global demand is helping drive this rally.
“You need two things to make a fire,” Grisafi says. “We’ve had that spark and we have that fuel and it’s consuming. This will be the most heightened sense of awareness of a growing season ever.”
He says it took 2,400 days for corn futures to get above $5 then 99 days to get above $6 and now just 14 days to get above $7.
“Expect volatility and understand truly how to manage risk,” advises Grisafi.
As the season progresses, Ted Seifried with Zaner Ag Hedge doesn’t expect that volatility to ease up.
“A lot of times this sort of volatility might indicate we’re reaching a sort of near-term high,” Seifried says. “I don’t think the highs are in. We very rarely put the highs in April or May. We’ve got a whole weather season to go in front of us and so unless something happens to make us really question the demand side of the balance sheet, we’re going to really need to be on our toes throughout our growing season.”
Weather remains a question as western Iowa and North Dakota continue to deal with significant drought and dryness.
“The next thing that will catch people’s attention is the 7 million acres of soybeans that are supposed to be planted into record dry soils in North Dakota,” Grisafi says. “I have several clients who had to quit planting because the soil was so dry they couldn’t even seed wheat.”
In other places, favorable and dry spring weather has helped to speed planting along. In states such as Iowa, Texas and Tennessee, nearly 70% of the corn crop is already planted. North Carolina farmers have planted nearly 80% of the state’s corn crop.
“We’re making some planting progress but the flipside of that is, are we going to get enough rain to get this crop off and running, especially there in the western belt?” asks Seifried. “Even if we get the intended acreage in and then some, we’re still going to have to see stellar yields this year to have a comfortable balance sheet for this next marketing year.”
The old-crop situation remains tight, notes Mike North of ever.ag.
“The moment we start to stress the perceived crop that is in the field and maybe mentally start to shave some bushels off of that because of how dry it is right now during planting, that gets people a little bit excited,” he says.
Given the dryness situation in the U.S. and supply questions in Brazil, North says, grain buyers are being forced to make sure they have enough inventory to meet their own demand. He knows at some point the price is just too high.
“As you look at these types of prices, they can come in a flash and leave just quickly,” North says.
“The job of the market is to get people to quit buying stuff,” Grisafi adds. “The job of corn is to say, ‘Hey, somebody drop out, somebody quit feeding cattle, somebody quit feeding hogs, somebody quit making ethanol.”
In the meantime, Grisafi says he’s concerned too many farmers sold bushels too early.
“If you’re a scale-up seller and you sold this corn at $4, $4.50, $5 or $5.50, you have close to a dollar loss on all your first bushels,” he says. “We’re in the biggest commodity bull market in history, and some people still don’t understand the intensity of this rally and they’re out of position.”
