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CBOT Soybeans - SOYBEANSNOV20
CBOT Corn - CORNDEC20
CBOT Wheat - WHEATDEC20
AIGG:xlon - WisdomTree Grains ETC (UCITS eligible)
The agricultural sector has continued to build on the strong gains seen during Q3 when the Bloomberg Agriculture Index recorded its best quarter since Q2 2016. The grains sector in particular was, and continues to be, the sector which is driving these strong gains. An unexpected decline in U.S. inventories, strong U.S. export demand from China, dryness in key growing areas together with growing concerns over La Nina are all potential strong forces that may support a sector that has already rallied by close to 15 percent during the second half of 2020.
This week, the price of Chicago Wheat raced past $6/bushel to reach the highest levels since December 2014, before seeing some profit taking ahead of a global supply and demand report from the U.S. Department of Agriculture on Friday. The latest rally has been backed by Russia and U.S. dryness worries, at a critical time as it challenges the establishment of the winter wheat crop. Bloomberg reports that in eastern Ukraine, some areas have been the driest on record since mid-July, while in Russia some regions are the most arid in three decades.
Soybeans, meanwhile, continue to find fresh buying interest with the price of the current front month contract reaching $10.65/bushel, the highest since 2018. On top of continued strong buying interest from China, the planting progress in South America has also been hampered by dry conditions across Brazil and Argentina. In Brazil, a bumper export program to China has reduced supplies while farmers have been hoarding stocks as a dollar-linked hedge against a weakening peso.