Grain markets are expected to continue to drift in a fairly narrow trading range for the rest of this month.
Trends are unlikely to develop until January when new acreage reports and weather will help shape the markets’ assumptions about 2007 crops.
Recent weather news has generally been negative for prices.
The drought that had settled on Shandong province in China’s winter wheat region was relieved by recent rain and snow.
Heavy rain fell on Brazil’s newly seeded soy crop, putting it on a good footing for the growing season.
Read Also
USDA’s August corn yield estimates are bearish
The yield estimates for wheat and soybeans were neutral to bullish, but these were largely a sideshow when compared with corn.
Argentina’s wheat harvest is progressing quickly with good weather. After early drought concerns, that country now expects to produce 13.6 million tonnes, up from 12.6 million last year.
Italian farmers said early this week they plan to increase durum and wheat acreage by about 25 percent.
American traders speculate that high corn prices will lead to a big increase in corn acres next spring.
After being forced to import 5.5 million tonnes of wheat this year, the Indian government forecasts its wheat area could climb by 2.5 million acres this year, or about four percent of expected acreage.
Balanced against these reports is the fact that world grain stores by the end of this crop year will be well down from the start of the year.
Also, new and growing biofuel demand is expected to keep stocks from rising significantly next year.
Apart from supply and demand, the market is also watching the currency markets.
In the last couple of weeks, the U.S. dollar lost more than three percent of its value against the Euro and other major currencies.
The only major currency not to rise against the greenback was the Canadian dollar.
The U.S. dollar slid because traders believe the economic slowdown in the U.S. will force the Federal Reserve to lower interest rates, prompting investors to shift their bond holdings to currencies with higher interest rate environments.
The U.S. currency was also shaken by comments made by a People’s Bank of China governor who indicated the bank might shift some of its massive foreign currency reserves away from the dollar.
While other currencies appreciated, the Canadian dollar varied little against the U.S. dollar because traders think a slowdown in America will also slow the Canadian economy.
The result is that many economic forecasters think the loonie will also drift lower against major currencies. They also think that the Bank of Canada will lower interest rates later in the year to support economic activity.
A wild card is the price of oil. If it rallies, it would likely cause the loonie to rise against the U.S. dollar.
However, barring such surprises, this situation of anemic U.S. and Canadian currencies could be good for Canadian agricultural exporters. A weak U.S. dollar encourages U.S. grain exports and supports grain futures prices. If the loonie does not rise against the greenback, prices here should also be supported.
