RealAg Markets: Blips to the high side should be viewed as selling opportunities in downward trending markets

Short-term bounces in grain prices should be viewed as selling opportunities in an overall bearish market, according to the president of grain marketing advisory firm IntelliFarm.

The lack of bullish news on both the supply and demand sides of the balance sheets for most major crops has resulted in prices sliding over the last few months, with funds now holding short positions in the futures markets.

Those large short positions could lead to temporary selling opportunities at the farm level, says Brian Voth, in this RealAg Markets discussion with host Shaun Haney.

“There is the contrarian view that something could happen that leads to a short-covering rally where they get spooked and they want to get out of their short positions,” he explains. “If something like that happens, it likely would be a short-term, technical-driven blip, not the start of a new uptrend again.”

“I think it’s an important thing for farms to realize is we are in an overall downtrending market and moves back to the upside now are selling opportunities. They’re not the start of a new bull market again,” continues Voth. (continues below)

Looking at longer term charts, he says there’s still plenty of room for prices to drop. For corn, December futures were trading at around $4.85/bu as of Oct. 12, well below the brief spike in June when they exceeded $6.25/bu. Voth maintains corn futures could drop another dollar, into the $3.80/bushel range, based on historical trading ranges, with the highs of the 2014 to 2021 sideways market becoming the new lows.

(source: barchart.com)

It’s easier to build a bullish case for oilseed prices, with tight North American supplies of soybeans and canola, but that narrative breaks down if South American farmers don’t face any major production challenges this winter, he notes.

Check out the interview above (or in any podcast app) for more fundamental and technical perspective on where markets are headed, and why budgeting costs-of-production is critical for farm profitability in today’s environment.

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