Bulls Are Hungry for Grains

The following excerpt is taken from our monthly Agriculture Outlook Report, issued to subscribers on the last Friday of every month.


Near-Term Grain Price Outlook:


+ We expect soybeans to maintain their bullish momentum on Chinese purchases and international demand diverted from the South American market. U.S. ending stocks continue to shrink at a remarkable pace, and will remain tight until Chinese demand abates or South American production returns to normal next year.

+ Corn’s upside will begin to brighten as selling pressure from farmers’ unloading of old-crop storage subsides. If heavy rains continue to blanket the grain belt, the trade will see increasing concerns that planting delays will encourage growers to switch to soybeans. This development will provide a bullish double-whammy to corn’s price outlook because it reduces both expected yields (late planting) and overall acreage (switch to beans). We should note, however, that any planting delay premium for corn may be somewhat muted, as last year’s results are still fresh in traders’ minds. Recall that we had record pre-season rainfall that flooded fields throughout the western grain belt, yet we still realized superb productivity with the national yield at 153.9 bushels/acre.

+ The supply-demand equation is far too bearish to allow any significant momentum to develop in the near term for wheat prices. Record prices in 2008 did their job to spur enormous production increases, which now leave us with quite ample global supplies to meet current demand. If the U.S. dollar’s strength persists, U.S. wheat sales will continue to lose marginal orders in the export market. One bright spot in the wheat outlook: Prices will benefit from significant production cuts both in the U.S. and abroad, although any gain will be muted by the influences of excess supply noted earlier in this month’s report.seeking alpha