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Ag Chatter (Part 2): What Does that Market Phrase Really Mean?

Farm Futures magazine analyst makes sense of commodity market jargon.

If you’ve ever tuned into a radio or TV farm market report (really any platform you get your ag news from!), you may have heard words that left you scratching your head, wondering what they meant. This was likely especially true during the volatile markets of 2021, when grain prices repeatedly made large moves and commodity analysts tried to explain the extreme price changes in new, colorful ways.

To help explain some of this market chatter, Jacqueline Holland, grain market analyst from Farm Futures magazine, spoke with us recently on In the Driver’s Seat.

Holland grew up on a dairy farm in northern Illinois and holds a Master’s in Ag Economics from Purdue. She says she’s even sometimes guilty of using terms that were foreign to her not all that long ago to explain price movements, but as she prepares the grain market analysis and economic commentary for Farm Futures she does her best to break down the information and clearly explain what it all means.

Why is the Market Moving?

When price action is reported in the media, there needs to be a reason why the market is up or down. Sometimes the reasons are related to developing fundamental news, like China making a grain purchase, a surprise in a USDA report, or a weather event. Yet other times, the reason isn’t immediately clear. In these instances, it seems like market analysts are at a loss for an explanation, so they simply cite reasons that may not make sense to their listeners.

One example: “It must be raining in Chicago.” This phrase is an old traders’ joke, but not everyone gets the punchline. “The saying is that rain makes grain. So, the joke here is that traders in Chicago see rain outside the exchange and assume it must be falling on the crops as well,” says Holland. “We know that’s not quite how rain works, but that saying is used when the market falls for no apparent reason.”

It’s Technical

Traders look to the price charts to determine what actions to take in the markets. They buy or sell based on “technical indicators,” and these factors are often cited by market analysts as reasons for why prices acted the way they did.

The technical trading community has its own extensive language, and Holland details a few of the more common terms in the podcast. One of these is “support and resistance.”

“These refer to price points on a chart that will bring in more buyers or sellers to the market,” says Holland. “For example, say the March ’22 Corn Futures Contract rises to a new high, but then it declines for a few days. It then, once again, begins to rise. That previous contract high is now considered price resistance, because it’s likely to bring in sellers who missed the high the first time.”

When Good News Can be Bad for Prices

Sometimes commodity prices fall even though there was news that should have been bullish, or positive, for the market. Holland explains that this is commonly referred to as, “Buy the rumor, sell the fact, or sell the news.”

“It’s used when markets have already traded on information that maybe has not been confirmed by official sources, primarily USDA,” she adds. Because the market had already rallied based on the rumors, the actual news is no longer as supportive of prices as it otherwise would have been.

The next time you’re reading or listening to a market report, see if you hear any of these catchy terms or even phrases that are new to you…because they may also be new to the analyst trying to explain an indescribable market movement!

 


Learn More

For more insights from Jacqueline Holland, listen to our latest podcast episode and check out her daily articles at farmprogress.com/farm-futures.

Your ADM representative is also a great resource for market information – with or without the jargon. If you hear something, and you’re not quite sure what it means, be sure to reach out to your ADM representative for an explanation.

ADM is providing this communication for informational purposes, and it is not a solicitation or offer to purchase or sell commodities. The recommendations in this communication do not take into account any particular individual’s or company’s objectives or needs, which should be considered before engaging in any commodity transactions based on these recommendations. The sources for the information and recommendations in this communication are believed to be reliable, but ADM does not warrant or guarantee the accuracy of the information or recommendations. ADM or its affiliates may hold or take positions for their own accounts that are different from the positions recommended in this communication. The information and recommendations in this communication are subject to change without notice.

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