Forecasting where prices will trade over the next twelve months is extremely challenging at the present, the value of grain and oilseed futures is driven by fear, greed, and hope.
At the moment, the ‘funds’ are very short wheat and corn and modestly long oilseeds. The actions of these funds are having a much larger impact on the prices of agricultural futures than would normally be the case. Grain merchants are closely watching the supply side of the cereal balance sheet, with a record crop of soybeans and corn in Brazil more than compensating for the losses in Argentina.
The drought in the US southern plains is restricting production recovery for US winter wheat, however, continued supply from Russia is making up for any short fall. The Russian Government may use the ’grain corridor’ as some sort of political leverage, making it all the more difficult to forecast their exports.
There has been news earlier this week that China is likely to drop the punitive imports tariffs on Australian barley. This sounds very positive, but we shall need to be clear on the details before we can say exports will flow freely.