Bullish traders looking for the current drought to extend into the rest of 2023 might not get what they wished for if a colder, wetter August plays out. As such, this could temper prices for corn and soybeans, but other factors can still push the commodities higher.
As reported by Reuters, the weather forecast will affect the U.S. Midwest as summer starts to wind down. In other parts of the globe, such as Brazil, extreme temperatures have been putting pressure on prices like corn as the expectation of lower supply weighs heavy on farmers.
“Cooler temperatures and increased rain forecasts are expected to bolster crop development, adding pressure to markets,” the report said.
“Some of the dryer spots of Iowa and Minnesota are expecting rain this week,” said Ed Duggan, senior risk management specialist at Top Third Ag Marketing. “The extended forecast, for August, they’ve taken all the heat out.”
Traders may use this opportunity to find an area of value as an entry point should prices continue to drop. As opposed to futures, they can utilize exchange-traded funds (ETFs) from Teucrim to play the price fluctuations.
For plays on corn, traders can consider the Teucrium Corn Fund (CORN). The fund tracks three futures contracts for corn traded on the Chicago Board of Trade. It includes 35% second to expire contracts, 30% third to expire contracts, and 35% December following the third to expire. The various contract exposures help the fund limit the negative effects of rolling contracts, especially during a market in contango.
For traders looking for opportunities in soybeans, consider the Teucrium Soybean Fund (SOYB). SOYB can essentially provide similar exposure to what investors could obtain by trading in soybean futures contracts themselves. This offers short-term traders or longer-term buy-and-hold investors with easy ingress when it comes to soybean price exposure.
Russia-Ukraine Still a Factor
Despite the expectation of colder weather, geopolitical factors still remain that can push agricultural commodities higher, namely the Russia-Ukraine conflict. Russia’s nixing of a Black Grain deal extension pushed ag commodities upward, and that can continue to put pressure on supply meeting demand as the conflict between the two nations rages on.
On the flipside, however, Russia has been flirting with the possibility of a deal, according to a different Reuters report. The report noted that the United States has been told by Russia that it could re-ignite talks to allow safe passage for exports from Ukraine, thereby adding another wild card for commodities prices—of course, it remains to be seen if Russia converts words to action.
“We haven’t seen any evidence of that yet,” a U.S. envoy to the United Nations said, per the Reuters report.
For more news, information, and analysis, visit the Commodities Channel.