After a recent surge in agricultural futures and related ETFs over the past few months, Chicago soybean futures slid almost 4.5% on Friday to their lowest in over a week, as rains across South America boosted crop prospects, generating expectations for increased world supplies.
Since supply runs inverse to price generally, the rains resulted in wheat, corn, oats, and soybeans all tumbling Friday.
“Soybean prices have rallied on the back of Chinese demand but the market is coming down due to South American weather,” said one trader at a leading Singapore-based company, which supplies the oilseed to China.
The Chicago Board of Trade’s (CBOT) most-active soybean contract dropped 4.42% to $13.05-1/4 a bushel. Meanwhile, wheat fell 3.9% to $6.35-3/4 a bushel and corn plummeted 4.58% while oats lost 4.16%.
More Rain, Less Gain
Heavy rain throughout the majority Brazil’s growing regions nurtured arid crops, as the country slowly begins its soybean harvest, which could help supply worries and drive prices lower.
Ukrainian grain traders also said on Tuesday they saw no reason to limit corn exports for the 2020/21 season, a move requested by animal feed and meat producers to avoid higher feed prices.
Ukraine’s economy ministry and agricultural unions will determine on Jan. 25 whether to curb corn exports for the 2020/21 marketing season to 22 million tons.
Despite the recent drop, robust demand for agricultural products is anticipated to provide a floor under the markets, limiting the downside.
The U.S. Department of Agriculture reported private U.S. corn sales totaling 128,000 tons to Japan and 100,000 tons to Israel, both for shipment in the 2020/21 marketing year.
Top importer China purchased a a historic amount of crops last year: 11.3 million tons of imported corn, and 8.38 million tons of wheat, according to General Administration of Customs data.
Among the best performing agricultural ETFs recently, the Teucrium Corn Fund (CORN), the Teucrium Wheat Fund (NYSEArca: WEAT), and the Teucrium Soybean Fund (NYSEArca: SOYB) were all dramatically lower on Friday amid the news.
It should be noted, however, that futures are volatile. Agricultural ETFs may offer short-term plays for savvy investors with the proper risk profile.
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