Markets Now: “Crazy” Explosive Volatility In Next Two Years

4/21/18 Markets Now

For much of 2017, the story—or lack thereof—in commodity markets was stagnant prices. That same picture has been playing out for the first four months of 2018, but that could soon be changing.

According to veteran trader Bob Utterback of Utterback Marketing, there are three main variables in the next couple of years that could shake the market: weather variability, currency and government policy.

“I don’t know anyone who knows how to predict those three with any great accuracy,” he said on Markets Now. “You as a farmer got to sell when you can make a profit and to fend against the black swan events when they do occur.”

Utterback said this “explosive volatility” will be “crazy, crazy” in the next two years, citing growing funds, mechanical trading systems, exports and South America.

“We’re going into a lot of unknowns—throwing weather into the mix—I think the markets are getting more difficult to predict in the future than they have in the past,” he said.

Another veteran trader, Brian Basting, believes this to be true as well, citing unprecedented yields not only in the U.S., but South America and the Black Sea as well.

“Volatility can be viewed with fear or as an opportunity,” he said. “Our bias is that volatility should be viewed as opportunity. You’ve got to get a marketing tool in place that gives you flexibility.”

One of those tools Basting suggests using is options. Some farmers might be reluctant to use puts or calls because of the premium involved, but he said options perform “exceptionally well” in volatile markets.

 

While this would work for a paper trader, Utterback says for farmers trading cash, farmers need to sell aggressively if old crop is still in the bin.

Hear Basting and Utterback discuss Chinese demand for soybeans and how China is stimulating South American producers on Markets Now on U.S. Farm Report above.

 
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