Grain Futures Expected to Rally on Demand Issues

For the first time in 38 years, supply of domestic grains (corn & soybeans specifically) trail below current demand levels after drought damage to to corn and soybean crops earlier this summer are now eating away inventory.  Current grain futures, however, seem to not reflect this disparity.

When the USDA releases its monthly crop production report tomorrow morning, analysts predict less of a harvest & inventory combined amount for both corn and soybean than what was consumed and exported last year.  Low supplies like we are now experiencing have only occurred twice in corn since 1960, and five times for soybeans.

Kevin Craney, a senior commodities broker for RJO Futures in Chicago, stated today regarding the current commodity futures situation, “While soybean yields across portions of the country have come in higher than some forecasts, they are still relatively low. Demand will be a problem as we continue through this marketing year, and price rationing will have to occur.”  Craney added, “Current (grain market) prices don’t reflect the true supply and demand situation that exists in this market.”

Corn and soybean futures trends are technically down at this time, but I have not been enthusiastic about being short these markets.  Let’s stand-by and refrain from doing anything in these markets until a clearer picture unfolds.


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