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Grains: Second-Quarter 2019 Review And The Outlook For Q3 2019


  • Grains were the best-performing commodities sector in Q2.
  • Corn leads the sector with a gain of 17.88%.
  • Weak performance in MGE wheat and soybean oil which were the only two losers.
  • A 15.35% gain in CBOT wheat.
  • The season of uncertainty peaks at the end of Q2.
  • Looking for more? I update all of my investing ideas and strategies to members of Hecht Commodity Report. Get started today »

While grains have been one of the sectors of the commodities markets in the crosshairs of the trade dispute between the US and China, it turned out to be the best-performing sector of the commodities market in Q2. After falling to lows in the aftermath of the escalation of the dispute in mid-May, prices took off to the upside as the weather took center stage. Floods in vast areas of the US farm belt caused delays in planting, which resulted in significant rallies.

Trade between the US and China will remain a significant factor for the grain sector over the coming weeks and months. A weaker dollar and the weather could trump even a negative outcome when it comes to the summit between Presidents Trump and Xi at the end of Q2.

A composite of the grain sector was down by 2.89% in 2016. The overall sector dropped by 14.48% in 2015 after falling 12.18% in 2014. In 2017, the sector posted a 6.03% gain despite bumper crops. In 2018, the overall grain sector moved 3.63% higher. In Q1, grains were only 1.71% lower at the end of March with losses in wheat and corn. In Q2, the sector moved 8.08% higher and is 5.96% higher over the first six months of 2019.

There were abundant supplies of agricultural commodities in 2018 to feed the world, and while trade issues weighed on prices, almost all of the grain markets posted gains last year. This year, the one guaranty is that there will be more people to feed around the world. In Q1, the global population rose by 18-20 million. The weather is always the most critical factor when it comes to the path of least resistance for grain prices at this time of the year. However, the sector continues to face an unusual dynamic when it comes to international

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This article was written by

Andrew Hecht profile picture

Andrew Hecht is a 35-year Wall Street veteran covering commodities and precious metals.

He runs the investing group The Hecht Commodity Report, one of the most comprehensive commodities services available. It covers the market movements of 20 different commodities and provides bullish, bearish and neutral calls; directional trading recommendations, and actionable ideas for traders. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis. Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.

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Comments (4)

How much was planted just to claim insurance money but is never going to be harvested? And tell me how many storages have been flooded or washed away this spring. Evenhorizons storages might be far less than he thinks. I hear him in December complaining about a missed opportunity due to not driving around and opening his eyes.
JackWolf profile picture
I'm deployed in S Texas, west of Brownsville and driving around a lot. I see a good many of fields underwater, mostly beans. In fact, many of the back farm roads are still flooded from last week's microburst. I know S Texas doesn't represent a huge part of the Ag equation, but these microbursts are happening all over the place this year. I think the weather will have a bigger role in the market from here on out, regardless of the amount in storage, cause things are certainly abruptly changing.
Farmers all over the US know that
- planting was considerably lower than in past years
- wet soil probably leads to a drastic reduction or complete failure in several areas
- farmers seeded to claim money from their insurance not in expectation of a high output
- the quality of output will finally show after harvesting season and it doesn’t look good

There is still a huge upside potential. The recent government report can only be explained in terms of insider trading to allow wall street to load on cheap options while naive investors may think the rally is over

The best is still to come. Long corn
eventhorizonyou profile picture
"long corn."
Too funny.

There's a lot more to trading soft commodities than the weather. In fact NOT trading the weather is the most important thing. Sugar can be made without use of either corn or cane is one obvious example.

Another is tremendous increases in the fuel efficiency and reliability of an internal combustion engine.

A third is the importance of understanding how massive transfer payments to farmers to "keep farming" in fact works.

A forth is how soft commodities are stored in reserve.
A fifth is how these commodities are transported.
A sixth are external factors like trade wars and indeed an all too real Civil War in Russia.

Definitely not long corn in 2019.

Nice thought tho..
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