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5 Factors of Grain Market Analysis

April 1, 2019 by Daniels Trading| Ag Marketing

Ag futures products offer participants an environment rich in both opportunity and utility. Whether your purpose in the markets is active hedging or speculation, ag futures offer a flexibility rarely seen in finance. From preserving wealth in the face of currency inflation to locking in profit on the annual harvest, the agricultural commodity markets offer a broad spectrum of possibilities.

Grains and oilseeds are among the most frequently targeted ag commodities. Driven by timely fundamentals and pertinent technicals, the dynamic facing these markets is sophisticated. If you’re going to achieve your goals in grains and oilseeds, it’s important to address five primary factors in your grain market analysis.

#1 Geopolitics

As 2018 showed us, global trade is an ever-evolving atmosphere. The U.S.-China trade war dominated headlines for months as a tit-for-tat exchange of tariffs sent ag commodities reeling. As the new import/export barriers destabilized existing trade relationships, pork and soybean producers were hit particularly hard,. Fallout from the U.S.-China standoff drove soybean futures sharply lower because the leading consumer of U.S. supply was taken out of the market. Staying abreast of changes in global politics is a critical aspect of any grain market analysis.

#2 Strength of the Dollar

The almighty dollar plays a pivotal role in the trade of all commodities, not just grains. In the event that inflation spikes and the USD backpedals against major global currencies, many investors choose to go long on commodities. Historically, commodity prices outperform other assets in keeping up with inflation. As a result, institutional capital has a tendency to implement hedging strategies incorporating ag products. If the greenback is under inflationary pressure, the grain markets are in a position to post gains.

Learn 7 basic and out-of-the-box strategies for success in Guide to Smarter Ag Marketing: Fixed Risk Hedging. 

#3 Energy Policies

No grain market analysis is complete without addressing current government energy policies, specifically toward the use of ethanol. A prime example of this market driver came in 2018 due to the Trump administration’s promotion of year-around E-15 integration. The long-term impact on corn demand stemming from increased ethanol production remains to be seen. However, the adoption of the aggressive ethanol policy boosted 2019’s planted corn acreage and regional purchases on spot markets.

#4 Global Supply and Demand

Perhaps the most elementary factor of grain market analysis is the age-old relationship between supply and demand. In fact, all of the factors on this list have at least a perceivable impact on one of the two. However, the reality is that many events can destabilize the supply-demand curve and pricing equilibrium. Because the grain and oilseed markets are truly global in nature, monitoring the current WASDE reports for domestic and global supply/demand information is a must.

#5 Weather

In close relation to global supply and demand is the impact of weather on the grain markets. Unexpectedly harsh atmospheric conditions, or a prolonged pattern such as El Niño, can significantly affect production and consumption levels. Although the weather is impossible to predict with 100% accuracy, evaluating macro environmental stimuli is an essential aspect of trading grains competently.

Take Your Grain Market Analysis to the Next Level

Whether you’re an ag producer or an active trader, grain and oilseed futures provide you with a variety of advantages. However, ag markets are complex and include many unique underpinnings — in addition to the five factors mentioned above.

To take market-moving factors into account as they occur, check out the DanielsAG mobile app. Featuring hedge recommendations, fresh content, and expert commentary, the DanielsAG mobile app is your one-stop shop for all things ag futures.

Guide to Smarter Ag Marketing

Filed Under: Ag Marketing

About Daniels Trading

Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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