Grain futures surge, bring may get to 20% as soft commotities rally on the Midwest flood

Grain is loaded into a truck during the fall in Malden, Illinois.

Daniel Acker Bloomberg | Getty Images

Grain futures are rising, up 20% for the month and approaching a 3-year high, as heavy rain forecasts over large aquaculture areas are at risk of delaying planting even further. The grain secretion leads to an increase in most soft goods this month.

Grain futures are increasing 4% on Wednesday, and hit their highest level since June 201[ads1]6, while other important items such as soybeans and wheat also rise. Soybean futures are up 3.5%, their highest level since April 16 and wheat futures are up nearly 3%, hitting their peak since February 14.

"Now the market is in a situation where you want very low inventory levels, very slender plantings, and next spring it can be a real problem," Peter Boockvar, Chief Investment Officer of Bleakley Advisory Group told , CNBCs Squawk Box Wednesday.

Grain futures are up more than 20% this month, while soybean futures have risen more than 2% in May and wheat quotas are above 18% this month.

In a record breaking wet spring, flooding in key aquaculture regions has caused unprecedented delays in planting, resulting in lower than expected stock levels. In corn, 58% of the planned planting has been done, compared to 90% at this time historically. For soybeans, only about 30% are planted, compared to about 65%, Boockvar said.

Returning to the USDA data until 1980, "it has never been delayed," he said.

"We still see bullish price risk for corn if wet weather continues through May / early June, as farmers can reduce cornfields and shift sowing to late bean beans, a bearish risk to the oilseed complex, especially if White House subsidizes soy production. We are more neutral wheat, which has been dragged higher by corn, "said CitiGroup in a note to clients earlier this month.

Together with bad weather, the trade war between the US and China complicates the planting picture. Before the trading boom increased, China accounted for more than 60% of soybean exports.

Last week, President Trump announced a $ 16 billion agricultural aid package to help farmers, a group that played a major role in Trump's 2016 victory, which has been hit by the commercial war. Farmers' aid legislation will compensate farmers, mainly in cash payments, for about 10 months of trade war loss.


The increase in commodities Prices will also have an impact on restaurants that have thin margins as it is, Boockvar said. Food prices are about 30% of a restaurants cost base with labor that accounts for quite a bit of the rest of the balance, he said.

"There is not much room to cope with an increase in food prices," Boockvar said.

– with reporting from CNBCs Michael Bloom .

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