Posted on February, 19, 2025 at 09:57 am
Inflation is alive and well, at least according to some reports out last week. And the Federal Reserve may agree, too. But should growers hoping for hedging opportunities get ready to join the party of rising prices? Your answer to that question could depend on the method used to forecast future moves.
After disappointing Feb. 11 World Supply and Demand Estimates, so-called fundamental analysts likely voted “no,” at least for old crop corn and soybeans, and maybe 2025-26 marketing year delivery contracts as well. But the jury is still out for technical traders, who follow the lode star of patterns on price charts.
USDA didn’t deliver terrible news about corn and soybeans in its latest monthly report, but the numbers weren’t bullish either. The agency made no changes to its forecast for how much of either crop will be left over at the end of the 2024-25 marketing year Aug 31. Average cash price estimates went up a dime for corn to $4.35, falling the same amount for soybeans to $10.10.
As headline news about trade wars, tariffs and tax cuts continue to fuel gyrations as markets emerge from the extended Presidents’ Day weekend, exports are the wild card for soybeans, and the tariff issue doubles down on that risk.
Potential retaliation by China is the big unknown after its response to the original tariffs from President Trump’s first term. Still, accumulated U.S. exports to date for all buyers are running nearly 17% above year-ago levels, which could add more than 60 million bushels to USDA’s sales forecast if the trend holds. That could raise average prices received by farmers for their bushels by more than 50 cents, with selling targets above $13, levels not visited since Christmas 2023.
A decline in Argentine production due to dry conditions didn’t help potential U.S. soybean exports, according to USDA, and the same held true for corn. Even with the 2% cut in corn production I forecast last week in Argentina, total U.S. exports could be a little softer than the government thinks, adding some 32 million bushels to ending stocks and knocking seven cents off the average cash price received by farmers. Under this scenario, nearby futures have already seen highs for the marketing year, with the top of the $4.65-$5.03 also dating back to the 2023 holidays.
Nearby corn tested the top of that band last week, stopping a tick below $5 on Friday, after breaking through resistance lines drawn off April 2022 and June 2023 highs, not to mention the first Fibonacci retracement of 23.6%. A month of consolidation on the heels of a rally of more than $1.30 off harvest lows suggests gains might not be over yet if futures can hold support around $4.68 to $4.725.
Weekly Nearby Corn
The soybean chart looks more limited. After failing to sustain tests of the trendline off fall 2023 and spring 2024 highs, daily nearby futures didn’t mount a challenge to that first Fibonacci retracement off the break from fall 2023-24 lows. The brief selloff in the wake of the WASDE went below the low from the end of January, though beans did hold above the lows from the middle of last month. So, failure to reach $10.80 could be the sign of a double top, which could be confirmed by a move below $10.24.
Daily Nearby Soybeans
The final charts to watch come from Wall Street. No, that’s not agriculture, but financial market swings could impact grain prices significantly.
The S&P 500 Index traded in a narrowing wedge after making a new all-time high on Jan. 20, Inauguration Day for President Trump’s second term. Over the past month the stock market benchmark saw a series of higher lows but was unable to break above the resistance line off January and February highs – at least until Friday. While the daily high fell $1 short of the January all-time high of $6128.04, the potential breakout could finally indicate the market has made up its mind about tariffs, et al.
Still, such a break higher could be either positive or negative for ag markets. Failure to confirm the breakout could trigger liquidation from impatient traders or investors. Friday’s trade carried its own bearish signal, a daily hook reversal lower, and holiday weekends have a reputation, deserved or not, for generating volatile trading.
S&P 500 Index
All manner of headlines could trigger either buying or selling of stocks, but one of the prime suspects of late is interest rates, specifically the widely traded 10-Year Treasury Note. Treasury Secretary Scott Bessent says Trump is focused on this longer end of the yield curve, and, instead of jawboning the Federal Reserve to cut rates, the President believes the 10-Year yield will fall naturally due to his policies to fight inflation and stimulate growth.
Prices for Treasuries move in the opposite direction of interest rates. So, when prices go up, yields go down, and vice versa, with myriad ramifications, from the value of the dollar to – at least potentially – grain futures, too.
T-Note futures broke below their uptrending channel from the past month Feb. 12, the second of Fed Chairman Jerome Powell’s two-day testimony to Congress.
“We do not need to be in a hurry,” Powell said on Tuesday, then on Wednesday added: ”The economy is strong, the labor market is solid and we have the luxury of being able to wait and let our restrictive policy work to get inflation coming down again.”
The bearish break Feb. 12 wasn’t confirmed, with Notes popping higher again into the end of the week, cutting yields on the 10-Year to 4.475%.
Source: Farm Progress