The Road Ahead
About Exchange Rate:
Last week, I got some suggestions from Araza, he asked me whether exchange rate has a significant effect on world price of crops. Therefore this week I have a look at it.
A stronger US dollar reduces the competitiveness of dollar-denominated exports such as many commodities by making them less affordable to buyers in other currencies. Therefore the demand of consumers from exporting countries will be less, which would increase the price of crops. According to Agrimoney.co, Chicago’s November soybeans fell 2.0% to $15.27 a bushel, with the better-traded January contract showing a 2.2% fall to $15.26 ¾ a bushel. At the same time, December corn fell by 1.4% to 7.39 ½ a bushel, while December wheat eased 0.2%, to $8.64 ½ a bushel.
About Production prospects:
- Weather: The worst crop conditions have forced some farmers to reseed the wheat, which reveals a worst start since records began.
In other areas, the downgrades follow a further period of weather extremes, following last season’s drought, which has landed much of Argentina and southern Brazil with excessive rain, while leaving many central and northern parts of Brazil with too little moisture.
The heavy rainfall delayed plantings of soybeans with data showing that farmers have planted only 3.6% of expected hectares. This situation also happened on corn seedings.
- Policy: Russia decided to remain open to grain exports despite a poor harvest this year. First, it means that the country may have some more supplies to ship this season. Secondly, this policy encourages Russian farmers to raise sowings of winter crops and spend more on the crop. Russia is propping up domestic supplies, and keeping prices somewhat in check, by releasing grain from state reserves.
Conversely, in Ukraine farmers will likely reduce winter plantings, because of the uncertainty sown by official statements on curbs, culminating last week in the country’s farm minister confirming a ban while the prime minister’s office denied a decision had been made.
Based on above analysis, the price of wheat is hard to estimate. I think the above information is not enough for me to make my guess. Therefore, I will follow Andrew’s step to learn some basics of technical analysis. Besides, this week I will pay attention to the report release date:
- Supply and Demand Report will be release on Nov. 8th
- The USDA was scheduled to release its updated crop estimates on November 9th
And According to the data from Forexpros.com, “market players should focus on the USDA’s weekly crop progress report on Monday as well as Thursday’s weekly exports data and Friday’s updated Supply and Demand Report.”
References:
http://www.agrimoney.com/feature/ag-investors-brace-for-controversy-as-us-stocks-data-loom–170.html
http://www.forexpros.com/news/commodities-news/grain-futures—weekly-outlook:-november-5—9-240264