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Grains & Softs Market Review

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Hello All:

It is obviously no secret that the U.S. has had a supply problem with corn and soybeans. As evidenced by the latest rallies (which I forecasted as early as May 7th and July 1st articles), I knew that we could have a heck of a ride in the grain markets. Is it over? Not quite. We are approaching harvest and a lot of supply shortages and heavy Chinese / export demand has been priced in but let us not forget what is going on down South in South America. We are very short time away from harvesting wheat in Argentina (November/ December) and also planting corn/ beans in Argentina/ Brazil in general. Argentina is experiencing a major drought and right now it is possibly impacting first the wheat crop which could be close to 18 mln mt (vs. USDA Sept at 19.5 mln mt). There are good showers coming in this weekend but the impact you can see in the below map:

The above map shows the brown areas which are highly drought stricken. This compares to the areas in the U.S. currently that are also in the same situation. The following article sources talk more about how bad the situation in Argentina is.


Now only do the farmers have to worry about drought but they have to worry about the whole country being in lock down and a HORRIBLE DESPICABLE socialist government being in control in Argentina. Pray for the Argentine farmer being they are being beaten up on all sides.

The latest USDA newsletter shows the following map:

The above map shows only the weekly precipitation but central / northern Argentina already are in drought conditions and this last week it received very limited rain (less than 1 mm).

Winter wheat will be harvested Nov/ Dec time frame maybe earlier because of dry conditions and some acres will not be harvested at all because of poor conditions. Farmers in Argentina are also considering delaying planting their corn and beans because of limited moisture. If planting delays occur, that means spring 2020 harvest will be delayed and postpone bushels coming into the market that normally are expected in the March to May time frame. What is key is that spreads in the deferreds will be impacted in a big way. In particular we are watching the Bean & Corn (and even Chicago wheat) H21/N21 spreads right now that are in a carry/ contango scenario. This could easily change if within the next 30-45 days harvest / planting scenarios in South America are delayed.

We like the deferreds H/N in the grains for now and the front-end spreads X/X and Z/Z seem a little bit overpriced at this point. We definitely like the Z/H21 in the soybean oil markets in bigger volumes as it is low margin spread and has good upside for now.

WE BOUGHT COFFEE IN THE LAST FEW DAYS AS WELL. Stock Market is well supported at current levels and fundamentally the S/U ratios from the last USDA implies levels should be trading closer to 120-130 levels where they were a few weeks ago.

If you want to learn more about our strategies, sign up for FREE 1 WEEK TRIAL! Our coordinates are below.

Best Regards

Edgard Cabanillas

TEL: + 1 949 357 4948



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