Wheat and corn prices has rebounded recently, as investors decided to take profits from short positions. Some of them may have become worried about conflict in Ukraine, which can disrupt wheat and corn exports from Ukraine and Russia. Some may have noticed that current prices can be a source of a wide deficit in 2015/16 season. Only soybean prices are still falling, as they are stll far from its productions costs.
According to many studies, margins on wheat and corn planting in Europe and the US are so low, that the prices should rise at least 20-30% yoy to make farmers not change their planted acreage next season. The USDA stated in its report that average variable cost of wheat, corn and soybean production in the US are now respectively 600, 440 and 900 USD per 100 bushel of crop. That is why from that perspective corn and wheat markets are now far from their long-term equilibrium levels, and an adjustment in the months to come seems likely.
Conclusions
We remain bullish on wheat and corn in the long term. Prices should rise mainly due to long term fundamentals, as current prices may result in sharp drop of crop acreage and yields next season. Moreover because of low level of inventories, prices are still vulnerable to any kind of supply disruptions in the US, Russia or in Europe.
X-Trade Brokers Dom Maklerski S.A. does not take responsibility for investment decisions made under the influence of the information published on this website. None of the published information can be treated as a recommendation, disposition, promise, or guarantee that the investor will achieve a profit or will minimize risk using the information published on this website. Transactions including investment instruments, especially derivatives using leverage, are in its nature speculative and can provide both profits and losses that can exceed the initial deposit engaged by the investor.
Recommended Content
Editors’ Picks
AUD/USD pressures as Fed officials hold firm on rate policy
The Australian Dollar is on the defensive against the US Dollar, as Friday’s Asian session commences. On Thursday, the antipodean clocked losses of 0.21% against its counterpart, driven by Fed officials emphasizing they’re in no rush to ease policy. The AUD/USD trades around 0.6419.
EUR/USD extends its downside below 1.0650 on hawkish Fed remarks
The EUR/USD extends its downside around 1.0640 after retreating from weekly peaks of 1.0690 on Friday during the early Asian session. The hawkish comments from Federal Reserve officials provide some support to the US Dollar.
Gold price edges higher on risk-off mood hawkish Fed signals
Gold prices advanced late in the North American session on Thursday, underpinned by heightened geopolitical risks involving Iran and Israel. Federal Reserve officials delivered hawkish messages, triggering a jump in US Treasury yields, which boosted the Greenback.
Bitcoin Price Outlook: All eyes on BTC as CNN calls halving the ‘World Cup for Bitcoin’
Bitcoin price remains the focus of traders and investors ahead of the halving, which is an important event expected to kick off the next bull market. Amid conflicting forecasts from analysts, an international media site has lauded the halving and what it means for the industry.
Is the Biden administration trying to destroy the Dollar?
Confidence in Western financial markets has already been shaken enough by the 20% devaluation of the dollar over the last few years. But now the European Commission wants to hand Ukraine $300 billion seized from Russia.