Grains were sluggish yet again overnight with wheat falling after solid advances in the past four days. Corn also drifted lower while soybeans posted a slight advance. In outside markets, the see-saw patterns continued with S&P and crude oil futures making relatively big declines before morning trade opened.
In Argentina, concerns over dry weather are starting to mount. An analyst for the Rosario Grain Exchange said parts of the Buenos Aires province is burning up and yield loss is possible. Two weeks ago, the Rosario exchange estimated the corn harvest for 2015/16 would be 23.8 MMT, up from 20.2 MMT in the previous season, due to a larger planting area and higher yields. The area hit by drought represented 8% of the main agricultural area of the country, which is also a top global exporter of soy and wheat. Looking ahead, World Weather Inc sees another ten days to two weeks of net drying in Argentina in the provinces of Buenos Aires, Sante Fe and Entre Rios.
Wheat was pressured overnight as Russia’s ag minister proposed to policymakers that the wheat export tax be eliminated or reduced, but would impose taxes on corn and barley exports. This is a seemingly different policy stance when earlier in the week Russia wanted to restrict all grain exports to curb inflation.
Oil prices bounced higher on Tuesday after senior OPEC and Russian officials stepped up vague talk of possible joint action to eliminate one of the largest surpluses in modern times, but any resolution seems unlikely. Meanwhile, U.S. crude stocks rose by 11.4 million barrels last week to 496.6 million, the American Petroleum Institute said, topping analyst expectations for an increase of 3.3 million barrels. That said, oil bulls are gradually starting to emerge, with this month's drop below $30. The options market shows traders are buying up protection against a rise to at least $40 by the end of the year, and speculators have increased their bullish bets on the price through the futures market.
The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a dba of Foremost Trading LLC (NFA ID: 0307930)
