Shifting consumption patterns and recovering harvests are giving Russian farmers more wheat and corn to sell overseas, and if Vladimir Putin is on the money, the final export numbers should help make up for drought conditions elsewhere.
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 second largest corn (CORN, quote) importer, China, sees corn imports surging to a record 28 million metric tons by 2015 -16, reflecting roughly a 700% increase in the next few years. Part of this is due to the likelihood of crop failures, but the rest is squarely in the lap of a growing middle class.
Farmers in Brazil have overcome many obstacles in the past but rainfall has not been one of them until the drought that began in Argentina spread, severely damaging both corn and soy bean crops. With no rain for the entire month of December and only one rainy day in January, farms are hard-pressed to remember a worse season.
China’s grain output hit record highs in 2011, and senior officials vow that the country will continue its pace of grain imports at appropriate levels to meet its rapidly expanding hunger for foreign produce.
Corn has been in a steady climb since last week Thursday as traders focus on a stretch of dry weather in Argentina. Commodity traders are concern that drought in Argentina, one of the world’s biggest corn exporters, will lead to smaller harvests.
And they said it couldn’t be done: a $20 billion a year tax credit for ethanol has ended in the United States. Sometimes the American political system does work, even when losing the subsidy directly hurts Iowa farmers in an election year.
Tomorrow they will be talking a lot about La Nina and whether China has leaned too far in the direction of corn to grow enough soy. The entire agricultural group could be in play depending on how the numbers stack up.