2017 has been a year of surprises for the corn and soybean market, from surprising yields to surprising demand. Last spring we were expecting big gains in soybeans acreage and fewer corn acres. Yet, in the end, the corn yields were surprisingly high and soybean yields a bit disappointing. Jim Bower, with Bower Trading, says that is not what the market expected, “The grain market did not anticipate a 4th year of near record crops. It is something that just does not happen very often.”
Because of the market’s focus on supply, commodity prices were relatively low. This helped spur higher than expected world demand. Even with burdensome stocks, steady demand from China for U.S. soybeans was strong most of the year.
Another market factor in 2017, according to Bower, was the volatile energy market led by big swings in oil prices. “The market is comfortable with oil prices around the $60 mark,” he stated. Even with some mid-year sell offs, the crude oil market has come back and this has helped the ethanol, and, in turn, the corn market. “Ethanol margins have been solid and supported higher corn prices, especially in the Eastern Corn Belt,” said Bower.
Bower expects this to continue into 2018 as China continues to ramp up its ethanol production, “They could build up to 50 new ethanol plants between now and 2021. That will keep their demand for corn strong.”
The stock market continued to move higher in 2017, and commodity funds decided to invest in equities rather than agriculture. Bower says this may change in 2018, “Stocks will remain strong in 2018, but perhaps not at the pace as 2017. This continued strength in equities will help pull all commodities higher.” He added that continued GDP growth by emerging markets around the world will foster world demand for a variety of food commodities.
For more market strategy information, contact Bower Trading at 800-533-8045 or bowertrading.com.
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