Commodities Market Review: Argentina’s Worst Drought Trembled the Grains Market

For all time, agricultural production is the result of a combination of two factors: financing and weather. This argument got strong support from the increased volatility in grains price over the past few months. The trembling in the market was primarily caused by firstly, this year’s drought conditions in Argentina and secondly, the tariffs and trade disputes between the United States and its trading partners around the world, including China, Mexico, Canada and more.

Grains Market Heat by Dry Weather

The severe drought in South America has accelerated the price appreciation of the three primary grains trading on the Chicago Board of Trade since the beginning of March. The price storm started from the soybean futures market due to the increased demand from U.S., the world’s largest soybean exporter. Argentina used to be the biggest soybean-meal producer in the world but this summer’s drought conditions have cut the soy yield by nearly 30% and hence created a great damage on global supplies. Soy meal for May delivery climbed to a historical record of $381.20 per 2,000 pounds on Feb 16. Following that, U.S. corn exports sour by 60% in early April to the highest level in at least 23 years. Finally, such ongoing weather concerns constantly supported the wheat market and pushed the price higher.

(Source: bakingbusiness)

Noises from Imposed Tariffs and Strike

Regarding the recent trade negotiations between U.S. and its partners, some political noises have added another layer of instability of the grain market. Upon Chinese cancellations of U.S. soybeans orders, soybean prices slide in mid-May.

(Source: youtube)

Despite that, Brazil trucker’s strike should be taken into account over the grains market. The protest results from the increase in diesel prices and lasts for more than a week from May 21. As the world’s top soybean exporter, Brazil sells massive amount of grains to its biggest buyer China. Combined with the recently imposed tariffs on China from U.S. supplies, the delay in Brazilian exports has significantly lifted the import demand of U.S. soybeans and driven up the price.

Wheat Jumped to One-Year New High

On May 21 I Know First algorithm issued a bullish forecast for Wheat Futures Contract #1 (CME_W1).

Over the 7-day trading period from May 21 to May 28, CME_W1  gained  7.29%,  the highest return in I Know First’s commodities package

On May 29, wheat continued to surge to the highest price of $5.54 per bushel since last July.

(Source: Quandl)



This bullish commodities forecast was sent to the current I Know First Subscribers on May 21st, 2018.

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