Back to the Futures: Grain and sugar prices drop, euro dives lower

Grains in the Drain

Corn, wheat and soybean prices all fell to the lowest level in years this week, driven by expectations for a bountiful global harvest. US farmers are expected to haul in record-sized corn and soybean crops this fall, and better outlooks for crops in Brazil and Europe are boosting the prospects of bin-busting global production.

As a result, the World Grain Council is projecting the highest grain stockpiles in nearly thirty years. With swelling storage, prices for grains have been plunging. As of midday Friday, November soybeans sank to $10.10, December corn crumbled to $3.50, and December wheat withered to $5.35 per bushel.

For those farmers who did not lock in higher prices earlier this year, this price decline has been extremely harmful, but end users such as livestock feeders are benefiting, especially as hog and cattle prices are near all-time highs.

Euro Dives Lower

The European currency plunged this week, falling to $1.30, the lowest level in over a year.

The decline occurred after an announcement from the European Central Bank that it was implementing a new round of stimulus. As part of this maneuver, the ECB lowered interest rates again, which they hoped would help economic growth via cheaper lending.

Meanwhile, low interest rates make the Eurocurrency less appealing to investors, who pulled money out of the euro in favor of higher-yielding currencies, like the US and Australian Dollars.

Sugar Market Turns Sour

On Friday, sugar prices melted to the lowest level in seven months, dropping to 15 cents per pound. Production of the sweetener has outpaced demand for four consecutive years, leading to swelling global supplies.

A few years ago, the world was facing a global sugar shortage, which pushed prices as high as 36 cents per pound. Since then, producers increased production in an effort to capture high prices. As a result, the world has shifted toward overproduction of both sugarcane and sugar beets, the two primary sources of the sweetener.

This change has been led by Brazil, the world's largest grower and exporter of sugar, where good weather has led to an increase in production again this year.

Opinions are solely the writer's. Walt Breitinger is a commodity futures broker with Paragon Investments in Silver Lake, KS. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.