Let’s just get this out of the way, the next few months have the potential to go in any direction. Without India acting as a guiding star to chart our course, markets remain listless and apathetic. Here is a future scenario to ponder until we know more.
Where we are (Supply Side): Growers bins are relatively empty and there is no virtually no pressure on them to try and force sales to generate cash or bin space. Export markets are saddled with high-priced products, but those are slowly disappearing at significant losses and product is not being replaced in the pipeline. Seeding has been difficult for many producers and production will not expand. As a result, it will be difficult to have an oversupply situation for 2018. These 3 points should converge in September with relatively strong growers holding less production in front of a diminished pipeline. The stage is set (again) for a potential run on prices.
What will happen (Demand Side): Some people will think about what just happened in 2017, see a similar situation developing and employ the old adage “once bitten, twice shy” or possibly “repeatedly bitten and now fearful for their life!” You would expect the market to show some restraint before engaging in a similar pattern this fall. It would make sense to collectively hold back bids and pace ourselves through 2018. However, markets make people crazy. Or, more likely, people are crazy all by themselves and markets give them the opportunity to play it out. Either way, there is no rule that says that our decisions must logically flow to maintain an orderly distribution of product through the crop year. It rarely happens. Greed and fear. Fear and greed. Old as life itself. No one wants to be left out. The need to block competitors and secure the production necessary to keep our facilities running at full tilt will drive prices past where they should be. Importers, looking at lowly stocked warehouses and fearful of them staying empty and will jump on board. With prices starting so much lower than last year it will be hard to see the downside risk. But it exists. Yes, it exists.