Since mid-December corn and soybean futures have been trending higher up to hit six month highs this week. The technicals confirm the move and remain bullish heading into the U.S. planting and growing season for both crops.
The fundamentals for both the soybean and corn bullish price trend has been supported by the hot, dry weather in South American farming areas where yields have been affected.
The supply and demand for corn and soybean has been at some of their highest, with the U.S. benefiting from strong exports. China has been stepping up its purchases of U.S. soybean along with corn. Weekly USDA export sales data continues to show strong numbers for corn and soybeans.
Traders will be turning their focus to the March 30 annual USDA Prospective Plantings report as trading begins this week. The USDA Prospective Plantings report is the most important USDA report for the year in the corn and soybean futures markets. Analysts are looking for this report to show record U.S. corn acreage seeded. Although this is ostensibly bearish news for corn, the market has absorbed analysis expectation with relative ease.
Why are traders still so bullish when analysts are expecting record plantings? It boils right back down to what drives markets – supply and demand.
The growth in overall world demand for soybean and corn means that Midwest American farmers will have to grow and produce bumper crops in the coming months in order to satisfy insatiable demand. In order for this to happen the Midwest region will need near ideal planting and growing conditions. Any weather or pest problems will surely produce panic, and could push grain futures even higher. Most years farms do experience at least one such weather scare throughout the year.
The best way to trade corn and soybean is through the futures markets. However, traders can trade corn and soybean markets through the Teucrium Corn Fund (CORN, quote) and Teucrium Soybean (SOYB, quote) ETFs, but you need to understand what you are buying and selling in these ETFs. Be sure to read the prospectus on each.