Commodities investors will continue to have inflation in their minds moving forward, but the growing season in South America could also have a profound effect, particularly on corn and soybean prices.
An uncertain market always makes for a volatile one. That’s what lies ahead for commodities investors as 2022 winds down and 2023 sets in with more volatility for corn and soybean prices, depending on South American production.
“Fundamentally speaking, grain prices heading into 2023 are on the verge of soaring higher or sliding lower with the price outlook heavily dependent on the upcoming growing season in South America,” a Farm Progress article noted. “The market is already pricing in record corn and soybean production from Brazil.”
According to data from the Agricultural Marketing Resource Center, South America has been increasing its corn production over the years, so its impact will have a substantial effect on prices. The same can be said for soybean prices, where South America actually outproduces the United States in soybeans, according to data from the U.S. Department of Agriculture.
Given this, factors affecting production in South America will be closely watched. One of those major factors will, of course, be weather patterns, which could spell doom or prosperity in terms of production.
“Therefore, traders will scrutinize every weather forecast in the coming weeks,” the article said further. “Any prolonged hot and dry spell for Brazil or Argentina could provide a $2.00 rally on soybean futures and a 50 to 75-cent rally on corn futures. However, if ‘perfect’ weather unfolds for Brazil, the slippery slope of lower prices could unfold during the month of December.”
2 Ways to Play Corn and Soybean Prices
With volatility ahead for both commodities, there are a couple of ways to get strategic exposure to rising corn and soybean prices via exchange traded funds (ETFs) that track these commodities.
For corn, consider the Teucrium Corn Fund (CORN), which tracks three futures contracts for corn that are traded on the Chicago Board of Trade, including 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.
Next, there’s the Teucrium Soybean Fund (SOYB). SOYB can offer similar exposure to what investors could obtain by trading in soybean futures contracts themselves.
For investors looking at ways to mute the impact of inflation, commodities may also be beneficial for inflationary periods, according to experts, making them a valuable hedge against the surge in the prices of goods and services the past year.
For more news, information, and strategy, visit the Commodities Channel.