Commodity Analyst Talks What’s Ahead in the Markets

The commodity markets appear to be bouncing back after the lows seen earlier this year caused to COVID-19. Dale Durcholz is a commodity analyst and Principal of Grain Cycles in Bloomington, Illinois. To get a sense of where the markets might be heading, Durcholz looked into trends on the Continuous Commodity Index and said the recent rise in commodity prices might not be long-term.

“We’re going to see some kind of a broad shift in terms of commodity prices that probably is going to stay with us over the next two or three years, something like that. There’s a bigger low out there a couple or three years out, so maybe 2026, that’s going to be out here. It may be a nine-year low, and also for this index, it looks like it’s going to be a 27-year low. I think the strength we’re going to see out of commodity prices over the next two-to-four years probably is going to be something short term.”

The strength of the U.S. dollar will continue to be a strong influence on commodity markets.

“The dollar has a three-year cycle to it as well, with lows coming about every three years. The one in 2017 might have actually occurred in 2018, but here were as 2020 timed it perfectly to put in another low, so we might see a little bit of strength. It’s going to be interesting, post-election, to see how this turns out. Ultimately, I think the decline we had here in the dollar off the peaks back in 2016, again, going up there in early 2020 and breakdowns kind of setting the stage where we are getting ready to go into a generally weaker dollar. That fits well with commodity prices being strong too.”

He talks about the months ahead in the corn market.

“The low we put in back in April was a 5.5-year low; I can’t impress that enough on people. That really completed what looked like a long-term cyclic up. The low we had in August was a two-year low, and with that two-year low, it really set the stage for strength. I didn’t anticipate this much this soon. Also, if you look at the shorter-term cycles, we had a 40-week low in April, we had a 20-week low in late September, so we have another low due here, probably somewhere in February or early March at the latest. I’m wondering if we’re getting to some kind of exhaustion phase with the market waiting on some fresh news.”

The soybean market may need some fresh news to help continue to push it to the upside.

“The low we had in April was a three-year low. We came back with a two-year low in August and a 32-week low in August too. We see another one out here in April with the next 32-week low. With everything that happened here, including the early talk about problems in Brazil and, to a lesser degree, in Argentina, when you look at all the soybean export sales we’ve already put on the books, you wonder if there’s a lot left in this market to give us a big push to the upside. Other than some minor strength, we had a big high in soybeans back in 2016 at 12 dollars, so I think we’re going to have some difficulty to try and move on higher and get over that 12-dollar level here.”

The wheat market is also looking for a spark to push prices higher.

“Wheat doesn’t have a lot of things in the mix here in terms of cyclic influences. Nine and six-year lows are behind us. We don’t have a good short-term seasonal, and with wheat, we rely on seasonals more than anything else. With the action we’ve had in the wheat prices here over the last three-to-four weeks, I’m wondering if we haven’t seen some kind of a winter peak, so it’s a matter of looking for some new influences to come into this game to maybe give us more strength to the upside at this point.”