Can the bull market in crop prices resume?
Even with severe tremors shaking outside markets and rattling the nerves of investors, many analysts think last week’s bullish U.S. Department of Agriculture report means the answer is a confident yes.
“Amid the current environment of seesawing sentiment, macro-economic unease and gyrating financial markets, the grains markets have been biding their time ahead of the August USDA (World Agricultural Supply and Demand Estimates) report,” said Barclays Capital after the report was released Aug. 11.
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“We have been highlighting that a fresh catalyst was needed to push prices higher and the August WASDE report was that catalyst.”
The report found that U.S. corn yields and ending stocks will be considerably lower than expected, and soybean yields and acreage are also lower than expected, creating bullish fundamentals.
The report said U.S. farmers will have an average corn yield of 153 bushels per acre rather than the 158.7 estimated in July. Corn prices shot higher, gapping up from about $6.90 per bu. to $7.15 for the December futures contract at the close of trade and rose further in the following days.
Soybean yields will average 41.4 bu. per acre, up from the July estimate of 43.4, causing stocks to tighten, USDA said. November soybean futures also jumped, leaping to $13.35 per bu. from $13.13 at the close.
Corn and soybeans are critical for all crop markets because they form the bedrock on which most other prices are based. Corn prices set the direction for grains, including wheat, oats and barley, while soybeans dictate the general direction of the vegetable oil crop, including canola and flax.
Equity and many commodity markets had a wild week, with the Dow Jones Industrial Average falling to less than 11,000 for a couple of days and West Texas Intermediate crude oil slumping to near $75 per barrel before most markets snapped back and regained most of their losses by week’s end.
Crop prices did better, with corn futures gaining almost nine cents per bu. over the week, soybeans up over five cents and hard red spring wheat gaining more than 33 cents.
Crop market analyst Alan Brugler of Brugler Marketing and Management in Omaha, Nebraska, said in an Aug. 15 interview that crop prices were likely to resume their climb now that the USDA has made the fundamentals more bullish. The volatility in outside markets has not stopped people jumping in to buy crop futures.
“The volatility caused some of the index funds and the hedge funds to pull back a little bit, but that doesn’t necessarily cause the price to go down if there’s someone standing in line to take their place,” said Brugler.
“We had enough of a bullish report that we got those buyers to step in.”
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corn12,447 13,470 12,914soybeans 3,329 3,225 3,056spring wheat 616 551 522durumoatsbarleydry beans10781180536456172n/a5757168
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