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    MARKET EDGES

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Agricultural commodities in general and corn and soy in particular declined sharply this week. The market had to digest both the Argentinean government’s capitulation and nearly perfect weather in the Midwest.

CBOT December corn closed at 628.5 ($6.285 per bushel) on Friday, down -20.24% from the all time high close of 788 on June 26, while November Soybeans closed at 1,448 ($14.48 per bushel) down 11.22% from the all time high close of 1631 on July 3, 2008.

CBOT September wheat closed at 804 ($8.04 per bushel) on Friday, down 36.69% from the year’s high close of 1270 on March 12 (40.42% below the all time high intra-day on Feb 27th). Remember that wheat soared in February and March on increased export tariffs imposed in the Ukraine, Russia and Argentina as well as draught in Australia.

Things can change very quickly in this market. We have been very lucky with weather for this corn crop in recent months, but the crop is less mature than it would typically be at this time of year. In recent week estimates placed only 13% of total corn crop pollinating vs. a seasonal average of 50% . If we had any additional bad weather the impact on this crop could be profound, driving total corn yield down by more than the 10% decline estimated by the USDA.

Additionally, the strikes in Argentina took many farmers off their land to work the picket lines and roadblocks, and the threat of heavy export tariffs did not encourage production during the planting cycle. Put bluntly, a lower yield caused by less ideal weather, lower stocks at harvest in Argentina resulting from the strike – or a combination of both, could return pricing pressure into these markets. Proceed with caution.

Andrew Barber
Director