Grain Markets Soar to Multi-Year Highs Amid Weather Concerns and China's Buying Spree
Grain markets have seen massive fund buying in recent days, pushing prices to multi-year highs. According to Allison Thompson of The Money Farm, a perfect storm has converged to bring about this surge in grain prices.
The soybean market was particularly affected, with soybeans hitting contract and multi-year highs. This was driven by the USDA's crop ratings on soybeans dropping 2% to 58% good to excellent, as well as weather forecasts indicating hot and dry conditions for the first part of September. This has led to concerns about a smaller crop.
Thompson noted that China's continued buying of soybeans, including a 5.0 million bu. purchase on Tuesday morning, is also contributing to the market's upward trend. She believes that China will continue to buy up until the September 24 meeting between President Trump and President Xi.
The EPA's decision to offset Small Refinery Exemptions (SREs) has also had a positive impact on soybean oil prices, which surged higher after the announcement. Thompson attributed this to the reallocation of RINs (Renewable Identification Numbers), which has increased demand for bean oil.
Corn prices have also reached contract and three-year highs, with December corn up about 75 cents on the month. Thompson believes that the market wants to go higher, with the next area of resistance at $5.50. Above this level, she expects prices to reach $6 rather quickly.