The pop in the grain market as the harvest kicks off was a bit of a “head scratcher.” Market advisor John Heinberg with Total Farm Farketing explains that sometimes the fundamentals of a market go out the window when other triggers come into play. He says the Federal Reserve lowering interest rates was one of those.
“Harvest is just starting to kick in. And what now we’re rallying here. So it’s just one of those things that really scratches the head in terms of some of the money flow, but realistically, sometimes fundamentals get pushed to the sidelines when the money wants to leave a position, and that’s what we’re seeing at this time frame. Some of that has been triggered by number one, that interest rate cut. We had that come into play. Just kind of makes a little bit more of a commodity friendly environment, weaker dollar, more cash in the in the system. So that helps out the commodity space.”
The Fed cut interest rates by a half point. That was greater than expected, the first cut since 2020.
In other market news, South America is starting to plant, and the market is watching that closely. Heinberg says the adverse weather in Brazil and Argentina is helping with the grain rally to start the week.
“About 26% on their first crop corn, which is more used in the industrial side or in the usage side in Brazil, doesn’t really hit the export market. Obviously, the big focus is the soybean planting. They’re about just under a percentage point done. Normally, at about 1.9% done. But we’re watching the weather very closely. They’ve been extremely hot, extremely dry, but it looks like that’s turning the page in October, as we seasonally see down there. Some of the rains are starting to return, and Brazilian farmers don’t plant until they get the rain first. Otherwise the seed will just stay in the ground and not germinate. So unlike here, we want to dry it in the spring so we can plant. There, they’d like to see some moisture.”
Heinberg says a bearish sign for the grain market is that we’re expecting a huge supply in the US and in South America.