Grain Markets Could Repeat 2020 Pattern, But Wildcards Like Inflation and Weather Remain

While no two market years are identical, 2024 is mirroring 2020 in several key aspects, leaving grain market analysts like Allison Thompson of The Money Farm pondering the future trajectory. Abundant supplies are currently the dominant narrative, but as history shows, that can change abruptly.

Thompson draws parallels between the current ample supply situation and early 2020’s outlook. Both years have ample projected ending stocks and corn stocks-to-use ratios above 17%. As 2020 progressed, initial forecasts plummeted, leading to counter-seasonal lows in late spring and early summer before a dramatic turnaround sparked by Chinese demand and surprise weather events.

This year, similar ample supplies are weighing on prices. However, Thompson highlights that USDA’s May report, which will include the first 2024 outlook, could bring even higher projected corn acres, potentially deepening the bearish sentiment.

Soybeans, however, could see a more seasonal 2020-style pattern if Chinese demand picks up. Signs of this may already be present in recent substantial US soybean purchases suspected to be by China. As South America’s harvest winds down, the reality of their production will significantly impact the market.

Despite current market perceptions, Thompson sees potential catalysts that echo 2020’s volatility, such as:

• Inflation: Despite recent positive trends, inflation remains a persistent concern. A resurgence, as indicated by rising hard commodity prices, could drive funds heavily invested short to switch long, rapidly pushing grain prices higher.
• Weather: While a spring weather market is often anticipated, 2020 showcased how extreme weather can turn the market on its head at any point. The anticipated shift from El Niño to La Niña later this year could bring drought conditions for portions of the Corn Belt.

Despite these potential wildcards, Thompson maintains a long-term bullish position on grain commodities. She anticipates a rally during the growing season, though the timing remains uncertain. The Great Scott moment for 2024’s grain futures is still unfolding.