Drew Wilkins is a Futures Broker at Daniels Trading, specializing in the grains market. In this interview, Drew talked about his trading philosophy, what we're seeing in the grains market this year, and what the outlook is for the future of this market.
Drew's trading philosophy
When asked about where he falls on the classic fundamental – technical analysis spectrum, Drew said he fell on the fundamental side, but noted that technicals still had an important place in his approach.
"I just don't find staring at charts very much fun. That's boring to me so I don't like doing it. But other people think fundamentals are boring and that's fine. I just don't enjoy looking at charts, drawing trend lines and that sort of analysis," Drew said.
"That said, I still use some of it for entries and exits. But the majority of time, I like looking at supply and demand, weather outlooks, what's going on in the field as far as the grains markets go. That's how I formulate my opinion on the market. And if I want to base a trading opportunity on it, I'll look at the technicals just to see where a good entry or exit might be based on support and resistance."
What Drew has seen in the grain market this year
When asked about the overall story in the grain markets this year, Drew had one simple answer: "Supply."
"We've got a ton of supply. There weren't really any weather issues this year. We've been in a bearish market since around April or May," he said.
As Drew predicted, the lack of weather issues and strong planting season led to a record-setting crop harvest this year. This has led to massive grain stockpiles, with notable examples being corn and the once depleted soybean stock. Drew sees the supply glut as the key driver behind the falling prices across the entire grains market.
How the supply glut affects producers
Falling prices may sound like a bad thing for producers, but Drew said that it all depends on the position that they took.
"If you're a producer and you hedged correctly, obviously you didn't hedge 100 percent or you're going to feel it. But you're also producing more. If you produced 150 bushels per acre last year, and this year you're producing 200 bushels per acre, you're not going to make as much, but you're offsetting that decrease by having more bushels to sell."
Looking toward the future of the grain markets
When asked about how the bearish grain market today could impact the market in the future, Drew said there are a number of possibilities. One possibility is that producers could look for other crops that are more profitable and use their acreage for those instead of the grains that are currently in a state of oversupply.
"Depending on what's profitable for them, they might plant more of that, or they could branch out," Drew said.
Drew also noted that specialty crops, even ones that aren't traded on futures exchanges, could see a bump in popularity. Crops like broccoli or alfalfa may command a premium in certain locations, leading to more farm acreage being devoted to those plants.
"Prices will dictate what they do. It's why markets exist. We saw $7 corn, and everyone planted it. It revamped supply, so the market did its job. We had a couple good years of that, so they adequately revamped the stocks here in the U.S. and in South America as well. Now prices are lower. The market will tell them something else is needed."
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