I wanted to start a conversation on Ag companies.
Grains are surging over the Ukrainian invasion.
Machinery companies: DE, AGCO, CNH
Materials: CF, NTR, MOS
I don’t have a list of grain ETFs handy so feel free to add and comment.
AGCO and CNH have production facilities in Europe, DE is mostly North America
CF, NTR, MOS mostly North America
Sorry this is rushed and mostly a placeholder.
$WEAT and $CORN are the ones that appear most affected
Found this that deals with how the ETF’s work in relation to the contract months they follow. Teucrium follows 3 futures months at a time most likely to mitigate risk. On 03/11/22 they will roll the closest expiring month out to a further expiring month. It varies by ETF but for WEAT they will drop the May '22 future and roll it to Sept '22… As of tonight May wheat is trading at 9.43 and Sept is at 9.09… Just a heads up if you are playing these ETFs.
This is important due to the difference between “old” crop and “new” crop, basically “new” crop usually trades at a discount.
I want to try and give a macro perspective on what’s going on in the grain markets.
Ukraine war, obviously a huge deal both in terms of grain exports but also in fertilizer supply.
South America drought, the market is still trying to determine how bad their drought was and how much production in both corn and soybeans was effected. China buys large amounts of both commodities.
Developing drought in western wheat belt US, it’s still early in the growing season but these areas rely on winter moisture to refill the soil moisture profile and they are behind so far.
Concern with drought expanding in to norther/eastern corn belt.
Acreage battle between corn and soybeans for the US. This comes down to the perception of profitability between the two crops, corn is more expensive to plant but can be more profitable depending on yield/price. This year the increase in fertilizer cost has made soybeans more attractive to plant, thus the theory is corn price must increase to “buy” acres from soybeans to ensure supply.
Right now grain commodities are incredibly bullish but this will eventually change. We are very close to record prices in all of these commodities. Please maintain adequate risk management.
I will try to look up USDA report dates and attach them here. USDA reports can be market movers.
To add to this, it looks like Palm Oil futures ( the most widely used vegetable oil) have seen a recent all-time high today ( Prices have spiked w/ most sunflower oil trade (15% of vegoil total) offline.)
You can see the tweet by Global Agriculture Columnist at Reuters here: https://twitter.com/kannbwx/status/1499041953479938048?s=20&t=odGgXqhspav0DGvmrPOWvA
The upside is coming from disruptions in substitution goods - sunflower oil out of Ukraine and Russia - coupled with supply-side pressure from top producers Malaysia and Indonesia (labor issues, weather). Additionally, the world’s leading producer, Indonesia, limited exports in January to help domestic prices.
There is some recent coverage on Soybeans and Corn I haven’t had a chance to delve into, but I’ll briefly add that both futures are trading at highs:
Average new-crop CBOT futures in February:
#Corn $5.90 per bushel (11-year high)
#Soybeans $14.33 per bushel (record high)
Awesome, good stuff!
A maxim in the soy market is “soy oil leads” so if you follow the movement of the oil market you may be able to make a more reasonable guess on the bean market. With palm oil running like that I would expect soy oil to follow suit.
Also historically corn and bean futures prices “try” to move to a 2.5 ratio between prices, i.e. corn at $5/bu beans at $12.50/bu. It’s not a hard and fast rule of course but if that gets to far out of whack the prices tend to adjust towards that ratio. For example as of close today corn/bean ratio sits at 2.376. The fun thing about that is guessing which crop is going to move.
Another thing to watch is oil prices. High oil prices are good for corn both through the ethanol market and through the increase in nitrogen prices (commercial nitrogen is made from LNG).
To be clear, I am NOT a grain marketer. I’m just trying to get some information out to the community.
https://www.cmegroup.com/trading/price-limits.html#agricultural
Daily price limits, should update automatically.
Adding $UAN to materials – much smaller fertilizer producer structured as an MLP. I posted a small bit about it here: CF Industries potential run-up to earnings and subsequent drop - #14 by SB
Yes, definitely worth watching. Good find!
this weat and corn selloff definitely seems unwarranted
