Ag Update: Look Out Below?

| July 7, 2014 | 0 Comments

Ccorn/wheat/soybeansorn bears are roaring today…

The essential food commodity is collapsing to multi-month lows near $4 a bushel. What’s more, the September contract is already dropping to multi-year lows at $3.97. The last time corn traded that low was the summer of 2010.

And that’s not all. Wheat and soybeans are succumbing to extreme selling as well. Wheat is withering to $5.57 a bushel while beans are nose-diving to $12.70. Both those price points are within pennies of the lows set earlier this year.

No doubt about it, it’s not a good time to be a grain bull.

What has these commodities collapsing?

First of all, USDA data reveals current US corn inventories are larger than expected. In fact, domestic stockpiles are estimated at 3.85 billion bushels as of June 1st. That’s well above analysts’ estimates of 3.7 billion bushels.

But more importantly, it’s 39% higher than last year’s levels.

Why are inventories so high?

As you may remember from recent articles, the ongoing PEDv outbreak has killed millions of US hogs. And since corn is the feed of choice for these animals, demand for the commodity is weakening.

And that’s not all…

The US growing season has basically gone off without a hitch. Rains were ample across the US Corn Belt in June. As a result, the 2014 corn crop will likely surpass last year’s, even though there was less corn acreage planted this year.

That leads me to soybeans…

Thanks to stronger soybean prices, farmers chose to plant a record 84.84 million acres of the commodity this year. And with Mother Nature supplying near perfect planting conditions, 95% of this year’s bean crop is already in the ground- well ahead of last year’s pace.

Even though current soybean inventories are relatively tight, this year’s bumper crop will likely provide more than enough to meet demand.

What about wheat?

Despite drought fears earlier in the year, the commodity is slumping to its lowest levels in months. The USDA sees 56.47 million planted acres, which is higher than the March outlook of 55.81 million acres.

All in all, grains have a decidedly bearish look to them…

Given the most recent USDA data, I wouldn’t be surprised to see the entire grains complex fall to new multi-year lows later this year.

Unless an unforeseen weather event wipes out large swaths of this year’s crop, there will be ample corn, soybean, and wheat supply at the end of this harvest season.

As a result, it’s best to steer clear of grains for the foreseeable future!

Until Next Time,

Justin Bennett

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Category: Grains

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.