A rough week for grain markets as the USDA confirmed some of the bearish talk surrounding the market for the last few weeks. South American soybean and corn production was increased, confirming numerous estimates that hinted at a larger than expected crop. Weather throughout the growing season has been almost perfect and early yield readings from their harvest were outstanding. A growing South American production number means a growing global surplus of both commodities that was not able to be offset by demand. While demand for soybeans has increased, it has done so at a pace equal to what has been projected and most experts believe that Brazil will not start to fill most of that demand with a larger, cheaper, and more readily available supply.
Corn was unable to build any positive story either this week with the quick burst in the price over the ethanol policy speculation now feeling like ancient history. After the market had tested its 6-month highs, it has come slowly back down to earth facing the reality of the situation. Even if corn acres are cut by their expected amount in the U.S. this year, we will still need to see either a less than trend line yield or a massive growth to usage to cut into our surplus.
Wheat also has come slowly falling back despite some positive news as the USDA cut the carryout number slightly. Wheat continues to move out of the U.S. at a better than expected pace, and acres are still being lost even after being near historic lows post-planting. However, the global supply and demand picture remains pretty dismal. This has spurred a renewed selling interest, which is the general story of grains recently.
-- Disclaimer: The data and comments above are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. Commodity trading involves risks, and you should fully understand those risks before trading.
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