Glacier FarmMedia | MarketsFarm—Despite the majority of all three major United States crops being in good to excellent condition, hot weather and speculative fund buying have lifted prices at the Chicago Board of Trade (CBOT).
Tom Lilja, market analyst and risk management specialist at Progressive Ag in Fargo, N.D. said the hot and dry weather forecast for the U.S. Plains and Midwest over the next two weeks has the potential to worsen crop conditions. However, short covering has also given a boost to prices.
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“The funds had a record net short ending July 15. What we are seeing is that they’re buying back those contracts for short covering,” he said. “Since last December, we’ve seen prices go down, down, down and there’s just enough concern about the weather that’s making them buy those contracts back.”
Lilja added August is usually crucial for soybean development, and hot and dry conditions during the month can have the potential to reduce yields.
A recent run of overseas demand for U.S. crops has also provided some support to prices.
“We’ve seen some corn sales uptick. We’ve seen a couple of large wheat tenders internationally last week,” Lilja said.
“International activity for wheat has been improving. We’ve seen more international grain buying. Prices are at a low level and we’re seeing some export activity.”
The next major event which could dictate where prices go is the U.S. Department of Agriculture’s World Agricultural Supply/Demand Estimates (WASDE) to be released on Aug. 12.
“It is likely (the USDA) could increase the corn yield potential from 181.5 (bushels per acre) to a higher number. That would really put the brakes on the market. It really will come down to the August WASDE report and if they do increase yields, then that will whittle (down) the upside on these markets.”
