‘Ugly grain week’ attributed to interest rate rumors, China rumors and climate change
It was “a lousy week in the grains,” AgweekTV’s Michelle Rook said, with a massive sell-off on Thursday that left many in the commodities markets scratching their heads.
Randy Martinson of Martinson Ag Risk Management said it was the biggest sale he had seen, with “blind sells” hitting all commodity sectors, not just agricultural commodities.
There were several reasons for the sale. Among them, Fed Chairman Jerome Powell hinted at a possible interest rate hike in 2022, which also affected the stock market this week. Another factor was rumors that China was trying to limit purchases in order to curb food inflation. A change in the weather forecast, with cooler temperatures and the risk of humidity, may also have played a role.
Regarding the Chinese factor, Martinson said that might not be a lasting reason for bear markets. There were rumors on Friday that Chinese organizations were purchasing eight shipments of soybeans for delivery in October. Not all sales have been confirmed. As Rook pointed out, this was a good time to buy with depressed prices on the board.
“It was a good deal for them,” she said. “Why wouldn’t they buy? “
Soybeans, Rook said, were the hardest hit this week. But Martinson doesn’t think the deal is over. He compared him more to everyone running for the door at the same time.
All it will take for this market, and others, to come back is another dry trend, he said. Drought is no longer just a problem in the Northern Plains, with Iowa and Nebraska seeing worsening conditions on this week’s US Drought Monitor.
The cattle had a good week, although they fell with everything else on Thursday. Part of that, Martinson said, is the hot weather that results in poorer feedlot performance. The pigs, however, fell. Martinson said the hogs and hogs report due for release next week will tell the story of the pork market from here; tight supplies in the forecast would likely lead to a resurgence in the market.
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