Free Commentary

By:  Dan Hueber –

After having concluded unquestionably the two most volatile weeks of the summer thus far, grain and soybean markets are rather subdued this morning.  While forecast, there was enough rain scattered around some of the drier regions of the country through the weekend would-be buyers appear sidelined for now.  It is interesting to note that spec funds have finally now transitioned from short to long even in the corn market after last week, but this change of heart coincides with a short-term overbought technical position so we are going to need to find a fresh stimulus if additional buying is to materialize.

While markets remain focused on the potential for rainfall or lack thereof in the western corn belt and northern plains states, we should not lose track of the weather issues that exist elsewhere around the globe.  We have referenced the dry conditions in Northern Europe that has already been trimming forecasts for production in France but it would appear there has been an even larger issue in Southern Europe.  Both Italy and Spain have been experiencing severe drought and it is already estimated that cereal grain production could be the lowest in the past 20 years.  Note as well that both counties are major producers of olives and it is projected that output could be cut in half this year.


Weather issues have not been limited to the Northern Hemisphere either as growing areas in Australia have experienced one of the largest heat waves in decades, with rainfall in the April to June period half of normal.  While there could be yet time for some improvement if rains do materialize but a number of analysts have already trimmed wheat production estimates by 20% or more.

While markets appear to understandably be preoccupied with growing conditions here in the United States, we are by no means the only trouble spot.  Granted, had problems extended further east into Ukraine and Russia we would have encountered a potentially explosive market situation, but it would appear that world production and inventories are set to contract, which in turn should be supportive to even positive for overall prices moving forward.