Rebound from declines in grain prices

Tuesday, 14. June 2016 17:13

Quotations of grain on the U.S. markets in recent weeks were doing exceptionally well. The price of corn grew rapidly and is currently standing above the $4 per bushel. Last week, the price per bushel exceeded $4.3. The quotations of soybeans climbed very quickly during trading last week and reached the level of $12 per bushel. Soybeans followed a generally upward trend since March. The rise in prices in April and May was mostly caused by heightened concerns about the supply of soybeans in Argentina.

The beginning of this week was marked by reduced prices of these two grain types, following the release of the U.S. Department of Agriculture publication. The weekly report on the pace of sowing and the condition of cereal in the U.S. noted that 75% of the domestically grown corn was of good or very good quality. The reported results were unchanged from the previous week, yet it created a positive outlook since the investors were expecting a decline in the quality of grain. In addition, the results from the same period last year were recorded at 73%.

The statistics of the cultivated soybeans in the United States also showed the good levels of quality as the USDA reported that 74% of soybeans were of good or very good quality at the end of last week, which signified a two percentage point increase from the same period with the week before that. Additionally, this recorded much better results than 2015, when the quality level stood at 67%.

Despite the provision of good data from the U.S. Department of Agriculture, the discount of corn and soybeans remains insignificant. This is due to the ongoing concerns regarding the supply of these two grains as forecasts predicted a dry season in July in the key cultivation areas of corn and soybeans in the U.S., which can result in the slightly worsened quality of the harvest. Moreover, the demand in the corn and soybeans market stimulates higher demand for grain in the United States, which, in turn, causes lower supply in South America. Difficulties weather conditions in Brazil and Argentina led to the less optimistic forecasts on crop production in those countries, which made the investors buy larger quantities of grain from other countries, including the U.S.

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Author:
Superfund/PG