Negative Day for Agriculture Prices, Wheat Loses the 5.000 Level

Soybeans prices are trading sideways, while wheat is losing the 5.000 level. Trade war and a cheaper dollar are containing prices.
Mauricio Carrillo
Negative Day for Agriculture Prices, Wheat Loses the 5.000 Level
Negative Day for Agriculture Prices, Wheat Loses the 5.000 Level

Soybeans and other grains are trading negative on Wednesday as investors are digesting news on trade war and a possible cheap dollar.

Besides, recent advances in the planting season are giving some hopes to farmers, and pushing pressure on soybeans, wheat and corn prices.

Soybeans are trading in consolidation mode around 8.695 on Wednesday, following Tuesday’s rejection at 8.860.

Corn is extending losses after a brief rebound from 4.140 to 4.268 on Tuesday. The unit is now testing sub 4.100 prices.

Wheat is falling for the second day with the unit extending declines below the 5.000 level.

Sugar is logging its first negative day in the last fourth as the soft got a rejection at 0.1240, its highest level since April 26. Sugar is now testing the 50-day moving average at 0.1214, which is now acting as support.

Fundamental reasons for declining grains and softs

As reported on Tuesday, China has decided to pile up soybeans already purchased to the United States instead of using it right away it receives as a measure to take a defensive position ahead of a prolonged trade war.

Investors are taking that step as a signal that both countries are ready for a long-term trading war. Also, with the delays in agricultural planting in the United States, China decision has given more room for bushels and agricultural stocks to expect that the demand for grains will not be too high.

Long story short, a shortage of grains supply will be compensated for the low purchase levels from China. Then, agricultural prices are going down.

Federal Reserve’s rate cut also affects Agriculture

A commentary from the St Louis Federal Reserve President James Bullard raised speculations about a rate cut by the Fed soon.

As noted previously in FX Empire, “an interest rate cut may be warranted soon due to growing risks to the economic growth in the United States motivated by global trade tensions and US inflation.”

This commentary sent the dollar down for several days until it traded below the 97.00 area at 96.75, where it finally found support.

A weak dollar would make US products and commodities cheaper in the world, so, farmers would sell more of their products across the globe. A piece of good news, especially after the trade war that China and the United States are fighting.

So, with a cheaper dollar, the ability to diversify markets and regions by US farmers will be bigger than before. So, They will be able to sell more.

Soybeans complete 8.856 rejection at 8.645

Soybeans daily chart June 5

Prices of soybeans are trading flat on Wednesday as investors are pausing to digest everything that is happening in the agricultural market. Delays in planting, the trade war between the US and the world, a possible rate cut by the Fed, and droughtiness in Africa and South America.

Previously, soybeans rallied to 8.856, its highest level since April 16, but the unit got a rejection at this level on Tuesday that sent the unit to trade as low as 8.645 on Wednesday.

Nevertheless, beans managed to find support at that level, and it is back around 7.720. Currently, CDFs on Soybeans are trading at 8.718, 0.02% positive on the day.

The chart is telling us that beans are trading in a range which frontiers are 8.645 as the bottom, and 8.825 as the top.

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