Sunday, July 9, 2017

Grain Prices rally due to US drought conditions, good for Ukrainian producers

Seeking Alpha:


Last week, a developing three-state drought in the United States that has swept across North and South Dakota and Montana caused a spike in the price of wheat, and on July 3 the other grain markets started to move aggressively to the upside. Grains were the second-best-performing sector in the commodities market in Q2, posting a 13.34% gain.


The last time there was a significant drought in the United States was back in 2012, and the prices of soybeans and corn rose to all-time highs, while wheat rallied to over $9 per bushel. Soybeans peaked at $17.9475 in September 2012 right before the harvest season. Corn reached a high of $8.4375 per bushel in August 2012, and wheat topped out at $9.4725 in July of that year. Soybeans and corn traded at all-time highs in 2012, but wheat found its high that year below its record peak at $13.3450 in February 2008.

Wheat price July 2017

If the price of grains continues higher this could be really good for Ukrainian agriculture. Both companies that I am invested in, Astarta and Agricom, have big grain growing operations. The world population keeps growing yet the amount of arable land is shrinking.

In addition, as the emerging markets become wealthier they add more animal protein into their diets. This takes a tremendous amount of grain to produce livestock. I am a long term bull on agriculture although with the caveat that prices are volatile.

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