MarketsFarm — Soybean, corn and wheat futures at the Chicago Board of Trade were all showing some strength Wednesday, recovering from losses posted over the previous week.
South American weather concerns and broader geopolitical tensions countered any bearish influence from the latest supply/demand estimates from the U.S. Department of Agriculture.
South America recently received much-needed rains, but Sean Lusk, vice-president of Walsh Commercial Hedging Services in Chicago, said heat and dryness will return in coming days.
“A lot of the further-out forecasts are putting hot dry weather, mostly dry, right back into the forecast as we go into February,” he said.
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“Argentina is the third-largest corn producer, behind Brazil and the United States, (and) the third-largest soybean producer and the largest bean crusher in the world… Conditions have gone from the good-to-excellent category at well over 80 per cent for both corn and beans on the onset at initial planting dates. Now, it’s down to 30 per cent for both.”
While March corn has been trading at each side of $6 per bushel on the Chicago Mercantile Exchange (CME) since the start of January, the March soybean contract has risen 40 cents/bu. to $13.84 since Jan. 1 (all figures US$).
As for wheat, the market is recovering from a major sell-off last week while also weighing tensions between Russia and Ukraine, two of the world’s largest wheat growers.
“You have supply-side fears. Now you’ve got escalating tensions between Russia and Ukraine. If there was an invasion, or the potential for a war to break out, you would think that (two of) the biggest wheat producers in a world are going to battle, the United States, Canada, everybody else needs to step up on meaningful demand,” Lusk said.
“That’s created a buying frenzy over the last couple of days, probably in an oversold condition. That’s what we’re seeing right now.
“If wheat continues to surge, all bets are off regarding where corn and beans might go here. There is food inflation, which is not going away anytime soon, and we’re going to see that spill over in other sectors.
“The bigger driver here is what’s going on in the crude (oil) sector. (Prices) are above $85 per barrel. We could hit $90 anytime soon and who knows from there, it can go up to $100 if war breaks out” in Russia and Ukraine, he added.
— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.
