To say the very least, 2018 was a volatile year for grains and oilseeds. Tariffs, ethanol production, and global economic growth brought consistent participation to the markets. Some products rallied while others lagged, giving ag market participants all they could handle throughout the calendar year.
Moving forward, the grain market outlook for 2019 is dominated by many of the same fundamentals. There has been no resolution to the U.S.-China trade standoff, El Niño is projected to hit North America, and questions still surround ethanol as an energy source. Without a doubt, the grain and oilseed markets of 2019 will be as active as 2018, if not more so.
Grain Market Outlook for 2019: E-15, Tariffs, and El Niño
The ag markets are sensitive to a variety of fundamental factors, ranging from politics to the weather. An active hurricane season, U.S.-China tariff one-upmanship, and a shift in U.S. domestic energy policy were pivotal influences on grain and oilseed pricing in 2018. When developing a viable grain market outlook for 2019, these are once again the key issues facing the market.
Aside from these three factors, approval or denial of the USMCA trade deal covers the gamut of the ag markets. The bill has applications throughout the industry and will impact pricing of commodities top to bottom. It’s scheduled for U.S. Congressional debate and vote sometime in 2019. If you’re active in the ag markets, be sure to keep an eye on any developments surrounding USMCA.
Aside from USMCA, here are several additional key factors that will influence the grain market outlook for 2019:
- Corn: When it comes to corn, the Trump administration’s push for year-around use of E-15 ethanol has many traders looking for booming demand in the coming 24 months. The December USDA WASDE report suggests that planted acreage will hold steady at 89.1 million acres in 2019-20, with ending stocks up modestly year-over-year. Given constant planted acreage and stocks, the potential for a late-2019 rally in response to boosted ethanol production is very real.
- Wheat: The projected El Niño weather cycle for 2019 has many wheat market participants calling for reduced North American output. Increased snowfall and extreme spring storms are predicted, boosting moisture levels in wheat producing regions. Estimates dated November 2018 give an El Niño system a 55 percent to 60 percent chance of lasting through the end of spring. In the event that heavy snows and storm systems become the rule, a spike in pricing may be on tap for summer/fall 2019.
- Soybeans: 2018 turned out to be a tough year for soybeans. The U.S.-China trade war fueled an intense tariff battle that swallowed up the bean market. Prices fell dramatically over the summer months, followed by a modest end-of-year rebound. In the event that the U.S. and China can strike a deal, this market may be poised for a rebound. If not, producers will continue to adjust their strategies, and values will fluctuate according to the geopolitical situation.
When it comes to grains and oilseeds, it’s always important to be aware of the calendar. This year is going to be especially sensitive because the 2020 U.S. Presidential election is due to kick off next January. While not a typical market driver, the election will have widespread ag implications, primarily the future of ethanol and international trade relations. If you’re hedging risk or speculating in ag futures, be sure to incorporate the evolving U.S. political situation into your 2020 grain market outlook.
Make 2019 Your Best Year Yet
Staying up-to-date on international relations, federal policies, and weather patterns is a nonstop chore. If you don’t have the time to sift through WASDE reports or read countless industry briefs, check out the DanielsAg mobile app. Featuring timely information and analysis from industry pros, the DanielsAg app can help you stay abreast of all things ag marketing.
