Grain rally curbed on weather outlook and speculative retreat Grain rally curbed on weather outlook and speculative retreat Grain rally curbed on weather outlook and speculative retreat

Grain rally curbed on weather outlook and speculative retreat

Commodities 5 minutes to read
Ole Hansen

Head of Commodity Strategy

Summary:  The grain market rallies this past month are showing signs of pausing as weather developments in some key growing are turning less hostile with rain finally beginning to ease yet elevated concerns about this year's production outlook. In addition, we are seeing reduced pressure from speculators, who following a three-week period of aggressive buying have managed to turn positions around to reflect the current outlook.


Global Market Quick Take Europe
Saxo Market Call Daily Podcast

Commodity Weekly: Selling pressure returns on policy tightening and growth concerns


The grain market rallies this past month are showing signs of pausing as weather developments in some key growing are turning less hostile with rain finally beginning to ease yet elevated concerns about this year's production outlook. In addition, we are seeing reduced pressure from speculators, who following a three-week period of aggressive buying have managed to turn positions around to reflect the current outlook.

The Bloomberg Commodity Grains Total Return Index which holds futures positions in soybeans (35.4%), corn (34.6%) as well as CBT and KCB wheat (30%) trades up around 15% so far this month and close to unchanged on the year. Despite some emerging profit taking which has seen top to bottom corrections between 6% and 8%, the gains this month are still notable, led by CBT wheat (+17%) with soybeans up 13% and corn 10%.

As mentioned, the rally has been driven by the prevailing hot and dry weather conditions in crucial agricultural regions, which have raised concerns about this year's crop production levels. These developments have spurred a significant amount of speculative buying, although the pace seems to have moderated recently due to weekend rains in the Midwest and forecasts of more precipitation in the coming days, which have provided some relief for crops.

Nonetheless, drought conditions persist, and their impact can be tracked through the weekly crop condition report released by the USDA (United States Department of Agriculture) on Mondays. In the latest report, both corn and soybeans received their lowest ratings since 1988, with 50% of corn and soybeans being rated as good/excellent, while wheat saw a small improvement to 50%. These statistics underscore the urgent need for rainfall to alleviate further upward pressure on prices. 

In this recent update from our equity strategist, Peter Garnry, he writes that agribusiness stocks are among the best performing segments of the equity market in June, up 6.3% compared to just 2.5% for global equities. The combination of stable to higher crop prices and the focus on initiatives to support production despite increased weather volatility is likely to drive more price supportive mergers and acquisitions across the sector in the coming years.

The iShares Agribusiness UCITS ETF holds exposure across 69 companies which tracks the S&P Commodity Producers Agribusiness Index. It is designed to track companies involved with production, distribution and processing as well as supplying equipment and materials. All companies that are needed to improve global access to food resources. 

Source: Saxo

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.