Fundamentally Speaking
Changing South American Crop Estimates
Do changing estimates of South American corn and soybean production influence corn and soybean futures prices?
That would seem to be the case though analysis we have done indicates the impact on soybean prices is far greater than that for corn.
This graphic shows the change in combined Argentine and Brazilian corn and soybean production from the January to the June WASDE reports in million metric tons (tonnes) vs. the percent change in July corn and July soybean futures from January 1 to June 1.
We chose June 1 for after that the primary driver for corn and soybean futures is U.S. weather which has a more muted impact on U.S. grain and oilseed prices before May 31.
Actually the change in South American (using just Argentina and Brazil) is somewhat muted with outside macro factors and the domestic S&D having more impact.
Actually there is not a bad correlation between changing estimates of South American soybean production and the direction of July soybean futures at -0.526 and that is three times the correlation coefficient between the change in South American corn output and the movement of July corn futures at -.174.
The negative coefficient does signify that increases in production generally lead to lower futures prices and vice-versa.
The fact that the correlation for soybeans is three times greater for corn is based on combined Argentine and Brazilian soybean production accounting for an average 47% of global soybean output over the past ten years vs. 10% for corn.
(KA)
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
Comments
To comment, please Log In or Join our Community .