Wheat
Export demand for wheat is expected to increase in the coming weeks for the U.S.suppliers; since wheat supplies are running low in the competitor exporting countries, such as Russia. As well, the recent ban on wheat export in Ukraine is also causing export demand to increase in the U.S. Interestingly, due to a disease ravaged harvest, which caused most wheat to fail to meet the quality requirement for bread, Britain is going to be a net wheat importer for the first time in ten years. Furthermore, the recent dry weather is hurting crop production in Australia and the U.S. plains. The dry weather and lack of moisture in the U.S. plains could possibly cause difficulty for winter wheat planting, and this is going to renew concerns about drought stress on the crops. An increase in exporting wheat demand, along with a possibly decrease in wheat product are likely to increase the wheat future prices in CBOT.
In addition, even though wheat future prices have been declining for the past two months, technical traders are going LONG on December wheat contracts, as they expect December wheat future prices to go up.
Corn
In the U.S., corn future prices have remained high due to reduced harvest yield. As well, farmers have been increasing their corn storage as harvest period approaches to an end. On the other hand, chief analyst for Northstar Commodity Investment Co., Mark Schultz, claims that oversea demands, ethanol production, and domestic feed demands for corn are all shrinking. People are no longer interested in corn, because meat and fuel productions are not making any profits. In the mean while, corn traders are waiting for the USDA to report the latest U.S. crop size, and it is possible for corn futures to continue moving in a sideway pattern. The recent hype on Hurricane Sandy could also have an effect on corn future prices. South County farmers who still had standing corn in their fields cut all of them in anticipation of Hurricane Sandy last week. Both high winds, and heavy rains could severally damage corn crops.
Recent news on corn showed signs of corn future prices going in different directions. Therefore, I think it is possible that corn price will continue to show a sideway pattern, and have fluctuations from day to day. As for the corn future price pattern for the next few days, I expect corn futures to spike early next week, rebounding from last week’s dramatic fall.
Soybean
Due to five consecutive years of decline in soybean growth and continuous growth in domestic demand, China’s soybean imports have increased to 57.5 million tonnes in 2012, and reached record high. According to the latest report from USDA, it is possible that China’s demand for soybean is going to reach 61 million tonnes in 2013. Also, major soybean producers after the U.S., Brazil and Argentina have started planting crops for next spring; traders can expect soybean future prices to be pressured from increasing in production, but increasing in demand from China is likely to pull the commodity price in the opposite direction.
Looking at the upcoming future, soybean future prices have been declining for two days straight (as shown above) last week. I highly anticipate the prices to rebound early next week. Since November, soybean contract is approaching its expiry date, and rapid fluctuations in S2X future prices can be expected until it expires. Hence, I plan to go LONG in January soybean contracts; since commodity future prices for contracts in the further future are more likely to follow the price pattern than the ones near its expiry dates.
Reference:
http://www.agriculture.com/markets/analysis/corn/grains-drift-lower-friday_9-ar27123
http://www.albertafarmexpress.ca/news/cbot-wheat-corn-end-lower-soy-higher/1001799830/
http://www.nzweek.com/business/chinas-soybean-imports-to-reach-record-high-18402/
http://online.wsj.com/article/DN-CO-20121026-009942.html
http://online.wsj.com/article/DN-CO-20121026-009477.html
3 replies on “WEEK 7 (Part 2): The Road Ahead”
Hi, Vicky. Well done! Honestly, I’m really impressed by your blog!
I think for next week, the weather will become the most important factor to affect the price of crops. Hurricane Sandy will attack the east coast of America. There will be more wheat needed and the transport of wheat will be inconvenient. Sandy is a very severe disaster that may cause severe floods.
Another reason may raise the price up is that Storms have pelted the South American grains powerhouse since August, raising uncertainty about crops needed to bolster food stocks after dry weather slashed output in other major producers such as Russia, Australia and the United States. Argentina’s upcoming wheat harvest is expected to shrink 17 percent from last season to 11.5 million tonnes, the Agriculture Ministry said last week, as farmers skirt export curbs by shifting to other crops. I’m afraid this week, the bad weather is the most important factor that can decrease the supply of wheat and increase the price.
Anyway, well done! Hope you can earn a lot this week!
Well Done Vicky! Honestly, I’m really impressed by your blog!
I think the weather will be the most important factor that will affect the price of crops next week. Hurricane Sandy will attack the east coast of America. There will be more wheat needed, less production and the transport of wheat will be inconvenient. Sandy is a very severe disaster that may cause severe floods.
Another reason may raise the price up is that Storms have pelted the South American grains powerhouse since August, raising uncertainty about crops needed to bolster food stocks after dry weather slashed output in other major producers such as Russia, Australia and the United States. Argentina’s upcoming wheat harvest is expected to shrink 17 percent from last season to 11.5 million tonnes, the Agriculture Ministry said last week, as farmers skirt export curbs by shifting to other crops. I’m afraid this week, the bad weather is the most important factor that can decrease the supply of wheat and increase the price.
Anyway, Good job! I hope your can earn a lot this week! Good luck!
Hi, Peter,
I agree with you. I think Hurricane Sandy is going to have a huge impact on the commodity futures prices for the next few weeks. In addition to wheat, it’s also likely to effect the production and transportation of corn.
Also, thank you for letting me know the bit about South America grains! It’s news to me.
Good luck with your trading too! =)