Argentina Drought Should Keep Soybean, Wheat Prices Afloat

Argentina’s drought is putting pressure on soybean and wheat prices. Further cuts in supply should help keep prices afloat for both commodities.

“Argentina’s giant soybean processing plants are running out of soybeans after a historic drought cut the crop in half, the head of the country’s grains export chamber told Reuters, and this will leave well over two-thirds of factory capacity idle,” Reuters reported.

The report noted Argentina had been the top exporter for soybeans. The country lost that top spot this year amid the drought.

“We are in a disastrous year,” said Gustavo Idigoras, president of the grain exporters and crushing chamber CIARA-CEC. He added he expected idle capacity at Argentina’s crushing plants along the Parana River to exceed the current 65%.

“Idle capacity could grow significantly,” he added. He noted the next soy harvest would not be until April. Idigoras said there would likely be just 3 million metric tons of soybeans left by the end of October.

Rising soybean prices will be a boon for the Teucrium Soybean Fund (SOYB), which provides similar exposure to what investors could obtain by trading in soybean futures contracts. As such, this offers short-term traders or longer-term buy-and-hold investors easy ingress regarding soybean price exposure.

Drought Affecting Wheat

As mentioned, soybeans aren’t the only commodity affected by Argentina’s drought. Wheat supply is also under pressure, which adds a catalyst for rising prices.

“Argentina’s core agricultural farmland could suffer ‘massive losses’ in wheat yields due to another drought, the Rosario Grains Exchange warned late on Thursday (October 5), even as the country reels from a drought in the last cycle deemed the worst in 60 years,” reported Reuters.

“The exchange has not yet changed its forecast for a 15 million metric ton wheat harvest for the current 2023/2024 harvesting season,” the report added.

Short-term traders looking to capitalize on fluctuating wheat prices can get ingress to wheat’s exposure via  ETFs. One fund to consider is the Teucrium Wheat Fund (WEAT), which offers an easy way for investors to gain exposure to the price of wheat futures in a brokerage account.

For short-term traders, WEAT offers the ability to get exposure to wheat futures without having a margin account. And for long-term buy-and-hold investors, the grain can also serve as an inflation hedge as consumer prices rise.

For more news, information, and analysis, visit the Commodities Channel.