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Where will grains go next?

Jul 23, 2020

Where will grains go next?The grain markets have been on the move in recent sessions as investors and traders digest several market conditions that could affect prices. The winter wheat market ended last week on a weaker note as the harvest spread north and is nearing completion. Spring wheat is seeing some good growing conditions currently and closed a bit lower. Of course, in addition to weather conditions and harvest progress, the market is also highly vulnerable to any changes in the Coronavirus pandemic or changes in the U.S./China trade relationship.

The corn market also ended last week on a weaker note. Like other grain markets, corn may be moved by fresh developments in the ongoing fight against the COVID-19 virus as well as U.S./China relations. The market is currently seeing most of its movement due to changing weather conditions. The hot, dry Midwest saw some rains last week that may be beneficial to the corn crop and some forecasts are calling for additional rain this week that may be supportive for prices. Any significant upside in corn may depend on the weather and how hot and dry conditions become.

The soybean market saw some upside in recent days as Chinese buying and weather conditions both drive prices higher. China has become increasingly active in the U.S. market to honor its agreed upon commitments in the Phase I trade deal. Weather conditions have been considered favorable for the soybean crop; however, forecasts are now looking for hot and dry conditions this week that could put further upside pressure on the market if concerns over supplies begin to take center stage.

Like many other global commodity and financial markets, the grains are likely to take their cues from the ongoing pandemic and any major shifts in U.S./Chinese relations. Those relations have recently taken a turn for the worse, as the U.S. blames China for the spread of the Coronavirus. With a turbulent news cycle, and many competing headlines, including an upcoming U.S. Presidential election; grains could potentially see ongoing market volatility.

The corn futures market remains near the bottom end of its recent trading range. A breakdown below $3.00 per bushel could send the market on a fresh and significant leg lower in value. The wheat market is in the upper half of its recent range and could potentially see further buying and upside given the right catalyst. A move towards $6.00 or higher, for example, could attract further buying and send the market sharply higher. The soybean market has been trending higher in recent months and is now approaching the top of its recent trading range. A push above the $9.50 region could send prices rushing towards the $10 level or higher as momentum buyers enter the market and shorts are forced to cover.

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DISCLAIMER: This document is issued for informational purposes only. This document is not intended, and should not under any circumstances be construed as an offer or solicitation to buy or sell, nor as financial advice or a recommendation in relation to any capital market product. All the information contained herein is based on publicly available information and has been obtained from sources that Straits Financial believes to be reliable and correct at the time of publishing this document. Straits Financial will not be liable for any loss or damage of any kind (whether direct, indirect or consequential losses or other economic loss of any kind) suffered due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information. Trading commodity futures and options products presents a high degree of risk, and may not be suitable for all investors. Past performance or historical record of futures contracts, derivatives contracts, and commodities is not indicative of the future performance. The information in this document is subject to change without notice.  The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices.