This article was first published in the April 18 Pro Farmer weekly newsletter.
The grain and soy complex has been plagued by the war in the Middle East as money flow has dictated price action, driven by large swings in crude oil futures.
Over the past couple weeks, that correlation has weakened and it appears daily price action is focusing more on fundamentals rather than headlines. The break in correlation between the ag complex and the ongoing war in the Middle East makes it easier to discern market sentiment, including the potential impact of the shutoff of a third of the world’s urea.
The grain and soy complex trading fundamentals once again allows market watchers to get a better handle on expectations for two key metrics: production in corn and export demand in soybeans.
With nitrogen prices set to remain elevated as urea looks to get shipped out of the gulf to the highest bidder, producers are likely switching some acres over to soybeans, especially on
more fringe acres. Meanwhile, the soybean export book remains rather disappointing, though soy prices did get a bump mid-week following a social media post from President
Trump stating a mid-May meeting with Chinese President Xi Jinping remains on track.
A return to trading fundamentals allows more insight into how funds and traders are thinking about the market.