In the grains segment of the soft commodities, Wheat and Corn prices slumped on cues of good weather forecasts in the US, which is one of the biggest producers of these grains. In the US, the moderate to good weather forecasts for Corn in the coming months has put a downward pressure on Corn and Wheat prices amid prospects of a good crop harvest increasing the supply.

Last Friday, the Corn December delivery in CBOT (Chicago Board of Trade) declined by 0.43% to trade at $5.2475 a bushel. In line with this trend, at the start of this week, the Wheat prices for the September contract on CBOT slipped by 1.5% to $6.7013 a bushel, on Monday. Previously, it had reached a session low of $6.6850 a bushel, with as much as 1.7% decline.

Extending its decline, on Monday, the Corn Futures for September dropped by 1.2% to trade at $5.3788, with a previous session low of $5.3713 a bushel, its lowest since July 9 this year. As traders’ bearish sentiment deepened, the December delivery for Corn too fell by 1.1% on the same day to trade at to $5.035 a bushel.

The fall in the futures prices of Wheat and Corn can be broadly attributed to the general increase in global supplies of these grains, mainly due to the rise in US production and a weakening demand for the grains.

According to the U.S. Department of Agriculture (USDA), stockpiles of Corn in US, the biggest corn producer, might probably reach 1.959 billion bushels by the end of the 2013-14 marketing year, exceeding the expectations of a 1.949 billion bushels increase. This is because the US is set to record one of its biggest harvest this year around 13.95 billion bushels. Apart from this the weather forecasts too predict a moderate to better weather conditions with normal rainfall that might cool the hot weather temperatures. 

Mirroring this sentiment, on Wednesday, the Corn futures for the September delivery on the Chicago Board of Trade (CBOT) fell by 0.1% to $5.4525 a bushel. Later, the September contract for Corn continued to trade between the range of $5.4888 per bushel, the days high, and the session low of $5.4450 a bushel.

Meanwhile, the other commodities like Coffee and Cocoa rallied up to a seven week high underpinned by the surge in Brazilian Real. On Wednesday, the Robusta Coffee September on the NYSE Liffe in London advanced by 1.2 % to trade at $1,927 a tonne. This rise was after it had reached a session high of $1,928 a tonne, its highest since May 28.

Whereas, in New York, the Arabica coffee too traded at a seven week high backed by the currency appreciation in Brazil, which is the biggest coffee producer in the world. Whenever, the Brazilian Real strengthens the exports become costlier and so, the farmers tend to wait it out and reduce the export quantity for the meantime. This creates a drop in supply boosting the Coffee prices.

On the other hand, Sugar prices plummeted to a three-year low with the Brazil increasing its Sugar cane harvests. In addition to this, exports from India, the second largest Sugar producer, is predicted to exceed the demand with a good start in the monsoon rains. The Sugar Futures, in the ICE US exchange for the October delivery, was trading at $0.1605 per pound with a 0.2% decline. The prices further deteriorated to $0.1604 a pound, its lowest level since July 2, 2010.

However, it is not a complete rosy picture for the grains in US, as especially, Corn is entering into the pollination phase. In the pollination period, changes in weather like drought and high-temperatures can adversely affect the yields of grains like Corn and Wheat. So, the prices of these grains depend on the US weather conditions, in the coming days.

Note: This blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.