Weather concerns aggravate grain and softs spike Weather concerns aggravate grain and softs spike Weather concerns aggravate grain and softs spike

Weather concerns aggravate grain and softs spike

Commodities 5 minutes to read
Ole Hansen

Head of Commodity Strategy

Summary:  Grain and soft commodities remain on fire as the immediate supply outlook continues to tighten on a combination of drought in Brazil, cold weather slowing the planting progress in the U.S. and surging overseas demand, especially from China. All three major crops of corn, wheat and soybeans have reached eight-year highs while coffee and sugar have both rallied strongly. The incredible 67 percent year-on-year gain in the Bloomberg Agriculture Index increasingly pointing to a bigger than previously expected impact on global consumer prices.

What is our trading focus?

CORNJUL21 - CBOT Corn (July)
SOYBEANSJUL21 - CBOT Soybeans (July)
WHEATJUL21 - CBOT Wheat (July)
COFFEEJUL21 - Arabica Coffee (July)
SUGARNYJUL21 - Raw Sugar #11 (July)


Grain and soft commodities remain on fire as the immediate supply outlook continues to tighten on a combination of drought in Brazil, cold weather slowing the planting progress in the U.S. and surging overseas demand, especially from China. The Bloomberg Grains and softs indices have both already jumped by more than 15% this month while the incredible year-on-year gains increasingly point to a bigger than previously expected impact on global consumer prices.

The immediate concerns relate mostly to Brazil where expectations for limited rainfall during the next 6 to 10 day period continues to support dryness concerns across most of the regions, thereby impacting the yield prospects for soon to be harvested corn, coffee and sugar.

Corn traded limit up for most of the day yesterday and has continued higher today to reach $6.84 per bushel. After spending eight years rebounding back above $6 per bushel, the front month contracts of May and July have already set their sights on $7 per bushel. Soybeans rose for a 10th straight session, also touching the highest level in almost eight years. Another eight year high was also reached in CBOT Wheat which by now has rallied by more than 25% this month to trade close to $7.7 per bushel. Dry weather concerns in the key growing regions in the U.S., Canada and France, as well as the pull from corn driving rising feed substitution demand, have all dramatically change the price action from what we have seen during the past five years.

Using Bloomberg Commodity Spot indices, the year-on-year gain across the whole agriculture sector has reached 67% with the grains sector currently trading higher by 70%. Adding these gains to already elevated fuel prices and surging industrial metals, it raise questions about central bankers commonly shared view, that rising consumer prices will be transitory and as such should not be a major concern.

While the near month contracts are pricing in a tightening market due to strong demand and dwindling output from Brazil, the new crop months, i.e. those that reflects market conditions following the northern hemisphere harvest are still pricing in softer prices this autumn. December corn currently trades 19% below the soon to expire May contract while the November soybean contract trades 13% below the May contract.

Whether these lower prices can be achieved all depends on weather developments during the coming months. To assist traders in determining the outlook they will be watching data on exports as China attempts to reduce its reliance on foreign grains while also seeking to reduce the amount of corn and soymeal in animal feed. In addition, weekly planting progress reports, published on Mondays and later into the summer months, the weekly crop condition report will be watched closely.

How speculators respond to these developments over the coming weeks and months could have a significant impact on prices. Overall speculators have during the past six months maintained an almost unchanged but near record exposure in corn, soybean and wheat futures between 540k and 560k lots, representing a nominal value of close to $25 billion. In the latest reporting week to April 20, bullish corn bets saw a small reduction from a ten-year high, the wheat position flipped back to a net long while soybeans saw the biggest one week jump in net longs since September.


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo 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 Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning 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. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

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 are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.