Dan Gramza gives Picking Alpha a brief review of the USA grains markets and their relationships with the EU grain markets.
Q: What are the major trends of USA grain market in March-April do you foresee with the stronger dollar, stable oil prices and approaching political risks in Europe ?
DG: My outlook for the US grain markets in March and April is a sideways market across the complex. The stronger dollar can decrease demand for US agricultural products. However, it does not appear to be a dominant factor at the current moment. The current crude oil trading range is favorable for farming operations and it is important for farmers to consider hedging with increasing crude oil prices. There appears to be a low expectation of increasing risk for agricultural markets with the outcome of upcoming European elections.
Q: How will EU forecast on Production growth affect the trends in USA’ grain futures market in March-April?
DG: The immediate reaction of US grain futures to positive EU production estimates can have a dampening effect. There are many other variables at work for the US grain prices during the March – April time. The ability for farmers to plant in the United States and the number of acres they get planted will begin to drive the expectation of US future prices.
Q: With some forecasts of grain’s price growing the market is still bearish, what are the major reasons behind this trend?
DG: Forecast are what I referred to as anticipatory fundamentals. This is a market condition that has not occurred yet it is only the potential of a particular occurrence. In this case the market is anticipating a positive movement in the grain prices, the market currently has not seen evidence of this positive outlook actually occurring which results in soft prices for the market.
Q: How US rates hike can affect the grain markets in the next 2 months? – in case if it happens
DG: The US rate hike typically increases the flow of currencies into US dollars. This increasing strength of the US dollar can decrease the attractiveness of US agricultural markets.
Dan Gramza is President of Gramza Capital Management Inc. and DMG Advisors, LLC. He provides daily market updates from around the globe on subjects ranging from the Nasdaq and currencies to crude oil and grains.