The commencement of the northern hemisphere winter harvest, signs of lagging demand, improving North American spring crops, and pressure from outside markets all weighed on grain markets this week. But the major influence was probably the move by speculators to cut positions in commodity markets and shift some money back into equities.
Grain markets will remain hostage to whims of speculators until mid-August when the USDA issues its first survey-based assessment of US corn and soybean yields. US ProFarmer has just finished an aerial assessment of crop damage in Iowa… and in the words of ProFarmer VP Chuck Roth – ‘I expected to see damage, but was stunned by what I saw’.
Although crops are improving by the day, if the USDA confirms poor yields, this will trigger the need to ration current supplies and set off a new battle between corn and soybeans for 2009 plantings. At current corn and oil prices, ethanol margins have moved back into the black, which should aid demand.
Beans were hammered by tanking crude oil prices and news that the Argentine Senate had rejected a proposal to lift export taxes. But with the Argentine administration calling farm leaders ‘greedy’ and ‘coup plotters’, we may not have heard the last of this.
Locally, barley and sorghum did not escape the wrath of the price pressure across grain markets. Local traders have been aggressively liquidating sorghum positions on concerns about the price implications of the Black Sea selling cheap barley into North Asian feed grain markets. Expect price pressure to continue for a little while until confirmation of poor US corn yields changes market sentiment.
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