With 2016 behind us, the focus now turns to a new year and how the markets will perform. Overall 2016 was not a good year for agricultural commodity markets, says Jim Bower with Bower Trading. Of the seven worst performing markets in 2016, four were agricultural, “Corn, oats, wheat, rice, and cocoa were all markets did not do well and were beat down rather heavily during the year.”
On the other hand, the stock market performed surprisingly well, even with the election. Bower says it is likely that 2017 will see an improvement in agricultural commodity markets, “I think that in 2017 some of these markets that did not do well in 2016 will have a better year.”
This, of course, depends on weather and supply of crops in both the northern and southern hemisphere. Bower says, as we begin 2017, good crop prospects in South America may keep US prices under pressure, “My scout in Brazil sent me an e-mail over the weekend that said some of the first bushels of soybeans to be harvested in Mato Groso had high yields, around 64bpa. That is certainly a short term negative for the market.” Longer term, however, Bower says China remains in the market for protein which is a good sign for the long term trader.
While there is a lot of market chatter about higher U.S. soybean acres this spring, Bower says farmers in the Midwest still like to plant corn and good spring weather could keep corn acreage high. “The jury is still out on that. I expect the market volatility to pick up once we get into February,” said Bower. He added that some investors are putting on a protective hedge on 2017 soybeans to protect themselves from lower prices if we have another big crop.