Making sense of grain and oilseed markets is difficult at the best of times. Supply/demand fundamentals and technical chart signals may provide a solid basis for educated guesses on price direction, but what’s to be done when the market influences come from all-caps social media posts?
Trying to make sense of chaos was a constant battle through Donald Trump’s first presidency, and his second term is shaping up to be more of the same before he even takes office. The latest shockwave for the markets was Trump’s promise to impose 25 per cent tariffs on all imports from Canada and Mexico while also upping tariffs on Chinese goods.
Forests are likely already being cut down to make room for the countless server farms necessary to store the commentary and analysis of Trump’s trade policies. What comes next remains to be seen, but knee-jerk market reactions to the latest late-night social media policy announcements are to be expected.
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Despite harvest pressure as Prairie canola growers continue harvesting, ICE canola futures showed modest strength in the week ended Sept. 12 on chart signals and spillover from Chicago soyoil.
Know your costs: Prices rise and fall constantly, but what’s profitable? That varies from farmer to farmer and location to location. Making a profit is what’s important. The futures markets may get messy, but local basis levels should compensate to some extent.
Options: Put and call options on the futures are a form of insurance on price moves. Like the name implies, an option allows the buyer of the option to buy or sell a futures position at a predefined price. Buying a put option, as an example, protects to the downside while leaving upside price movement open.
Take a breath: The initial market response to the most recent tariff talk was aggressive, but cooler heads eventually prevailed, and market participants appear to be taking a wait-and-see approach for the time being. Chasing an erratic market can sometimes pay off, but that has more to do with luck than anything else. In the face of uncertainty, it makes sense to keep your head and not immediately jump to the worst (or best) case scenario.
Keeping an eye on online chatter is necessary these days, especially when it’s the preferred mode of communication for the most powerful people in the world. That said, stepping away from time to time is also always good advice.
