Some bound effects of huge decline in the prices of corn, wheat and soybean are expected this following week. Nevertheless, I predict that these prices will start to rebound slowly because of low exporting sales. Then there will be negative changes in price early next week but not as much as last Friday. Argentina, the world’s No.6 wheat exporter and No.2 corn supplier after the United States, modified corn and wheat export policy to increase purchases of both grains for overseas. Domestic farmers are encouraged to plant more in the future. Under this new rule, exchange date showed that 3.8million tonnes of wheat and 6 million tonnes of corn would be purchased in2012/13, way up from 1.2million tonnes of wheat and 2.1million tonnes of corn at this point in last year. However, this season’s single quota was announced after the farmers already started planting wheat. Therefore, the exchange expects Argentine wheat production to fall sharply this season. 2012/13 wheat production will be 10.12million tonnes, dropped by 28percent from 14million tonnes produced last year. Ricardo Marra, resident of Buenos Aires Grains Exchange, said that growers would have planted more wheat if the wheat export quota was announced two months earlier, with the high prices. Fortunately, the announcement of the quota for corn came in time to encourage farmers to plant more. The area seeded with corn is still 12% less than last year, but 8% more than the original plan before corn export quota was announced. With the quota, a month later 15 million of 2012/13 corn would be available for exports . Therefore, I expect that wheat future price will rise continuously and corn future price will drop after increase due to the bound effect the following week. I would like to get short position in corn and long position in wheat.
Cindy Bae
Comodity Price Analysis and Policy Analysis
Hey, Cindy,
It seems like we both expect wheat future prices to jump this coming week. I think wheat price is going to increase because it fell way too much on Friday, and it went to a lower price than experts have expected .It is only reasonable for it to rebound after such an unforeseen drop. Thus, despite the 2 wheat contracts I already have in the market, I am looking at placing another long contract for wheat on Monday, if not, Tuesday. Hopefully our predictions are right! 🙂
Hi Vicky,
I am so glad that we have the same prediction. Yay!
I am pretty sure that there will be bound effect of huge decline on wheat price last friday! And Argentina, No.6 wheat producter, planted wheat so much less than last year.
So, I believe that more demands shifted to US wheat.
Thanks for your comment and wish good luck for both of us!!!
Have a good night and see you in class tomorrow!! 🙂