Election volatility reaches wheat, corn, soybeans and cattle markets

Wheat and corn came under pressure on Nov. 6 as reports pointed to possible Russia-Ukraine-U.S. peace talks on Nov. 10-11, while unconfirmed rumors of a deal with Iran added another source of uncertainty.

Randy Martinson, president of Martinson Ag Risk Management, told Jamie Dickerman of the Red River Farm Network on Friday, Nov. 6, that wheat and corn remained under pressure. He placed politics, rather than a documented change in supply, at the center of the week’s volatility.

What did the election change for markets?

In Martinson’s reading of Tuesday’s U.S. elections, Democrats won House and Senate majorities while the executive branch remained Republican. Election-night trading showed markets bottoming and then shooting up, including a big jump in the Dow. He attributed the rebound to the prospect of government gridlock, meaning policy action would stall.

“Which does favor the markets a little bit because it means nothing changes,” Martinson said. That prospect offered only fleeting stability. No specific farm subsidy, regulatory change or payment program was identified, so the policy effect remained an expectation of continuity rather than a measurable change in input costs.

News following the elections cast doubt on results, and investigations were opened. Martinson said that development sent financial markets sharply lower. Unlike the election-night rebound, this response reversed the earlier direction and extended the volatility beyond agriculture.

How do harvest conditions and USDA estimates shape prices?

Harvest was wrapping up across much of the northern Plains. A big chunk of the Corn Belt harvest had slowed because of rain, although progress was pointing toward better-than-anticipated yields in much of the growing region. These were field-condition and production expectations, not final harvested results; final acreage, yield and tonnage were not reported.

Next week brings another USDA crop production report on Tuesday, another opportunity for data to move the grain market. Martinson described the last two USDA reports as questionable and expected fresh questions around the new release. Pre-report estimates had corn yields coming down a little and soybean yields going up a little.

He framed the report around two questions: whether corn yields would fall slightly and whether soybeans would reach a record crop. Despite his reservations, Martinson said USDA estimates were the figures traders had to use. No sample size, estimate range, survey dates or reporting window accompanied those figures, limiting comparison with the prior two reports.

Those agronomic developments shape the supply outlook, but no local cash price or basis was reported. Basis is the difference between a local cash price and the corresponding futures price. Input-cost effects also were not quantified, so market direction cannot be converted into a farm-margin estimate.

What role does South America play?

Martinson said South America was looking at some record crops, which he expected to play a big role in grain markets. Growers there reported very wet conditions, while planting progress had gone very well. The record-crop reference remained a forecast rather than a harvested result, and no regional acreage or export estimate accompanied the outlook.

Why did the cattle market weaken?

The livestock market also fell, with cattle taking what Martinson described as a sharp weekly decline. He singled out the cash market. Volatility and uncertainty in the stock market contributed to the move, while the seasonal movement of calves to market made more supply available and added pressure.

For producers, weaker cash cattle prices mean less revenue at sale, all else equal. The discussion provided no cattle price series, feed costs, other input costs or basis calculation, so it cannot show how much the margin changed or whether lower selling prices were offset by lower costs.

What should producers do with grain marketing plans?

Martinson advised producers to be patient, ride out the volatility and wait for better prices. “We’re telling guys just to be patient with marketing any more grain,” he said, adding that they should wait until after the first of the year. He also recommended watching South American weather during the growing season for a clearer direction.

That recommendation offers no target price or detailed sales schedule. Without current cash prices, basis and input-cost data, growers cannot calculate what patience costs in a weaker market or what a rebound would add to margins.

The next checkpoints are Tuesday’s USDA estimates, developments in the election investigations and South American weather; local basis and input costs will determine how those moves reach farm margins.