Commodity markets showing signs of bottoming out: Flory

Farmers and commodity traders alike have heard plenty of gloomy predictions from market analysts over the past few months.

There are a lot of bearish feelings regarding grain markets, Chip Flory of AgriTalk says, but there are signs that commodity prices may be finding support.

“The corn market is finding what it needs to do — put a floor in at that price level,” he notes. While short-term volatility is possible, Flory believes the market will remain in its current sideways trading range.

On wheat, Flory acknowledged the market has definitely favoured the downside; however, there are some indications that it wants to put a low in, too. The soybean meal market has taken Flory a bit by surprise, as it rallied twice due to the Argentine drought. “It’s surprising as heck to me that the meal market is able to do that,” he says.

There are currently many concerns surrounding weak global demand in the meal market, as challenges like China’s economic slowdown continue. However, as Flory notes, he’s somewhat optimistic. (Story continues below interview)

“We’ve got economic activity here in the U.S… typically that is enough to generate some economic activity in other spots of the world, including Asia,” he says, while noting that he expects other importers like Mexico, Colombia, and South Korea to start filling their corn needs from the U.S. soon.

Another focus for many traders currently is the issue of low river levels hampering barge traffic, which, as Flory notes, is increasing transportation costs but is keeping basis levels at a firm holding spot. “There’s still enough demand to fill those barges,” he explains, adding that demand at ethanol plants remains stronger than some assume.

“When you look at the realities of the market, with corn basis firming up during harvest, and soybean basis firming up during harvest, it can’t be that bad,” says Flory.

“Once the funds decide it’s time to get out of short positions in corn, and in wheat, because the markets just aren’t going down like we thought they would — I think that triggers a lot of the activity in the cash market that we’re looking forward to.”

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