AG Futures at Multi-Month Lows

Corn and wheat futures both entered a bear market recently, as investors have been liquidating their long positions in the past few weeks. Corn hit a four-month low today, following the U.S. Government’s announcement that U.S. and global supplies will surpass analyst estimates this season. In fact, the grain has dropped 20% over the past 12 months. Increased production estimates are a result of favorable weather in the U.S. and growing production in Brazil and India. Global stockpiles are expected to total 182.7 million metric tons by the end of the 2014-15 season, surpassing analyst forecasts of roughly 182.1 million metric tons, the U.S. Department of Agriculture said.

The wheat crop  (of which the U.S. is the main exporter globally) is also projected to beat estimates. This caused it to hit a three-month low today.

So, what’s behind the slide? Well, we “are seeing some sellers in the pits (…) in Chicago, and I think it all started back May 9th; we saw that high print in corn, nearly $5.25, about a 15% retracement, due to the fact that there’s favorable conditions. A lot of people continue to be bearish, but I’m actually bullish here: it’s a long time to harvest. I have a lot of folks in Madison County, Iowa, these farmers are saying the first thing they do when they wake up in the morning is see what went wrong,” a CNBC reporter says.

On the opposite sidewalk, another journalist assures that wheat will get cheaper from here.

“I think they’re going to go lower. We’re expecting record production this year, and the USDA just 30 minutes ago said they expect better production next year. The chart is really ugly for the longs and there’s no reason to think we’ve seen the bottom given the production news we’ve gotten today.”

Disclosure: Javier Hasse holds no interest in any of the commodities or futures mentioned above.

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