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Volatility in the markets again this week from WASDE report and inflationary pressures

Favorable weather forecasts hinted at recovery for commodity markets, but the July World Agricultural Supply and Demand Estimates report and macroeconomic concerns cut that down, said Randy Koenen of the Red River Farm Network and Randy Martinson of Martinson Ag Risk Management.

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Normally at this time of year traders are focused on weather, but the USDA’s latest World Agricultural Supply and Demand Estimates report and a slew of macroeconomic concerns has brought unforeseen volatility in the markets this week, said Randy Koenen of the Red River Farm Network and Randy Martinson of Martinson Ag Risk Management.

Koenen and Martinson agreed that it was yet another wild week and ending day to the markets.

“This was one of those weeks that was kind of draining,” said Martinson.

Wheat traded lower every session this week, while Martinson said that hints of a breakout for both corn and soybeans due to forecasted weather failed to gain much traction.

“Traders seem to be looking for something to grab onto, and they just don't know what to grab right now,” said Martinson.

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Koenen said there’s a feel in the markets this week that investors have already started exiting, after not much seems profitable right now. Martinson said the shift is from macroeconomic concerns which are starting to weigh heavy on all markets, including commodities.

Whether or not the fight against inflation will result in a recession is a looming question right now for all traders, said Martinson. Speculation over the Federal Reserve hiking the interest rate one full point at its next meeting hit the market hard this week.

Funds are liquidating the commodities, and taking the money to try to buy cheaper stocks, said Martinson of the trend that's seemed to set in.

“They're trying to get their prices down a little bit on some of the stocks they own,” said Martinson.

WASDE report

The USDA’s latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) report on July 12 may not have seemed all that bearish at the time, but Martinson said the report “gave us the unknown” and brought to light what the markets were really looking at.

“A little bit negative on the corn side, as we did see stocks increase by close to 70 million bushels,” said Martinson. “For wheat – I didn’t think it was that bad of a number that we should’ve seen that kind of a hit on the wheat side of things.”

For soybeans, the numbers were not “as friendly as we expected”, said Martinson.

“I didn't think that the numbers from the (WASDE) report justified a 45-cent drop in just about all the commodities,” he said.

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Noah Fish is a multimedia journalist who creates print, online and TV content for Agweek. He's also the host of the Agweek Podcast.

While covering agriculture he's earned awards for his localized reporting on the 2018 trade war, and breaking news coverage of a fifth-generation dairy farm that was forced to sell its herd when a barn roof collapsed in the winter of 2019. His reporting focuses on the intersection of agriculture, food and culture.

He reports out of Rochester, Minnesota, and can be reached at nfish@agweek.com
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