The commodity markets are paying attention to a couple of key factors influencing price movement. Joe Vaclavik, founder and president of Standard Grain, says there are two things traders are watching.

“I think it’s Brazil weather and maybe a lack of demand would be the two things. Soybean export inspections were the lowest seasonally in 12 years last week, so not a good sign.”

He says the demand drop-off begins with China.

“I think there are some issues with China. China’s the biggest soybean buyer, and their crush margin is negative, so the Crushers who crush beans in China aren’t making money. Brazil, even though they have crop problems, supposedly they’re still cheaper than we are on the export market. Beans landed in China anyway, which is the one that matters, so you’re seeing weak demand. You could probably say the same thing for corn to maybe a little bit lesser extent. The export book there has improved a little bit, it just hasn’t been enough to rally the market by any stretch.”

U.S. bean prices have to come down to be more competitive, but the story is different in corn.

“They have come down, and I don’t know how far down they need to come to be competitive. Corn is competitive. We are competitive in the export market but haven’t seen an uptick in business. I wouldn’t be shocked if at some point, especially if you ran into a Brazilian weather problem with this second crop, I wouldn’t be shocked if China or somebody else stepped up their U.S. corn purchases. That’s something that I’m not going to say is going to happen, but it’s something that could rally prices at some point in time. We saw China buy U.S. corn last year during the winter and spring, and then they eventually canceled a bunch of it. Even if those initial purchases or something like that were to repeat, I think, would be positive.”

Brazil’s weather and crop conditions have had a big influence on the markets since late last year.

“They were really dry in October, November, and then the rains kind of normalized to some extent in December, and they’re normalizing more so in January. That’s a big part of the reason why the soybean markets backed off. You go back to the early to mid part of November when it was really dry in the forecast, and it looked good. Beans were 14 bucks. There is a lot of uncertainty surrounding Brazilian production, and I think the general thought now is that the crop’s not going to be as good as we thought maybe it would be before the season, but it’s not going to be a train wreck either.”