Large grain harvest announced

5/4/2016, 2:05 PM (Source: Superfund)

The beginning of May is a period when moods on commodity markets are getting worse. Yesterday's session on the markets of energy, industrial metals and precious metals, as well as agricultural commodities, was marked in red, with the exception of rice, meat and sugar.

Repricing of cereals attracted special attention as they were the most dynamic. The price of wheat, depending on the specific futures contract, fell by 3-4%. Fundamental information contributed to the decrease in price of this commodity. The U.S. Department of Agriculture reported 61% of the U.S. wheat grown in the winter was good or very good quality last week, which is an increase of 2 percentage points compared to the previous week.

Besides, optimistic information is coming from the state of Kansas, which is a key region of wheat production in the United States. The local cyclic test of the quality of grain grown shows that this year's harvest may reach the level of 47.2 bushels per acre, while it was only 34.3 bushels per acre last year. Research on quality has not been completed yet, but the first day has brought the best results since 2012.

Announcements about great harvest and a plentiful supply of wheat, not only in the U.S. but globally, contributed to the fall in the cereal’s price. A similar situation can also be seen on the maize market, where trading fell by less than 3% yesterday. In the case of maize, it also has the opportunity to bring large harvest in various parts of the world this year, primarily in North America and South America.

At the same time, we should keep in mind that the repricing of cereals at the beginning of the week largely corresponded to commodity funds actions. In April, institutional investors actively concluded long positions in the markets of many raw materials and commodities, and now some of them have decided on their closing.