The pop in the grain market to start the week was a bit of a head-scratcher, says market advisor John Heinberg with Total Farm Marketing in West Bend. He explains that a grain rally at the start of harvest isn’t traditional.
“Sometimes the fundamentals get pushed to the sidelines when money wants to leave a position, and that’s what we’re seeing at this time frame,” he says. “Some of that has been triggered by that interest rate cut.”
Heinberg notes the U.S. Federal Reserve’s lowering interest rates created a commodity-friendly environment with a weaker dollar and more cash in the system. The Fed cut interest rates by a half point, greater than expected. It was the first cut since March of 2020.
In addition, South America is starting to plant, and the market is watching closely. Heinberg says the adverse weather in Brazil and Argentina is helping with the grain rally to start the week.
“They’re about 26 percent on their first crop of corn, which more used in the industrial side… in Brazil. It doesn’t really hit the export market,” he says. “The big focus is the soybean planting. They’re just under a percentage point done. Normally, they’re about 1.9 percent done.”
He says the extremely hot and dry weather has held up soybean planting. The rains are starting to return as we get into October. They’ll plant after the moisture comes so that the seed can germinate.
Heinberg adds a bearish sign for the grain market is that we’re expecting a huge supply, not just here in the U.S., but in South America as well, according to early planting estimates.
