Farm Futures writers Jacqueline Holland and Ben Potter are on assignment at the Business Summit this week. Larry Shonkwiler, Senior Agricultural Economist at Advance Trading, Inc., provides guest commentary below.
Overnight values are off their highs, but near-by corn is still up nearly $.05 per bushel. Argentina received some heavy precipitation over the weekend, pressuring markets on Monday. However, it IS a futures market and with some forecasters at mid-day calling for intensive heat over much of northern Argentina, southern Brazil, and Paraguay for the next 10 days, although accompanied by frequent rounds of storms, the markets perhaps reacted accordingly overnight. Values may also have been supported from a pick-up in corn inspections as they topped 47 million bushels with China taking nearly 14mbu and both Mexico and Japan making respectable showings. The China program is finally picking up, averaging 10/week for the past month. Barge freight on the US river system remains tight; the situation is expected to worsen next week and frigid temperatures and ice move across the Midwest. As indicated above, while the forecast shows good precipitation in Argentina for the balance of the month, the recent drought is thought to have damaged crops and there is still a long growing season ahead.
The overnight session opened a couple of cents higher and then moved to double digit gains with SH up $.13 as we approach 7 am. Argentina got some rain over the weekend—hence, yesterday’s sell-off-- and has many traders asking if “has the crop stabilized, or is now growing?” Argentina’s bottom line remains one of significant improvement during the coming week; however, there will be more ridge building in February. But it will be important that Argentina continues to see timely rainfall to protect late season crops. Now crop analysts are suggesting Rio Grande Del Sul is big problem area in Brazil. Some are suggesting the crop is in the 10-12 MMT range, well short of CONAB’s 21 forecast. The market may be reacting to this week’s solid inspections figure at 63.2 which was way more than the 22-51 trade range. The uncertainty of the back end of the U.S. export program in July and August from the smaller SAM crop prospects is also providing support, as did yesterday’s record NOPA monthly crush of 186.4, nearly 2 more than the trade average.
The overnight session is steady to firmer with Minneapolis now up $.17; HRW values are nearly 12 cents higher and SRW, up 10. Reasons? Take your pick... Up sharply yesterday and continuation overnight due to one or all of the following: (1) lack of new selling; (2) short covering; (3) unwinding of long corn/soy short wheat relationships; (4) market uneasiness regarding a possible military confrontation between Russia and Ukraine; and (5) dryness in the Southern Plains. Also, inspections of 13.6 mbu were at the upper range of guesses and 5 mbu more than LW’s shipments. Although Russian weather is improving with key wheat growing areas forecast to receive heavy snow this week. Winter kill has been minimal leading some early production estimates to exceed 82 MMT which could result in an export total of 38 MMT vs current trade guesses of 32 MMT. However, U.S. is trending the opposite direction with 70% of the winter wheat crop in some stage of drought and nearly 100% of the HRW belt falls into that category.
CME Prices as of 6:54 am CST
Larry Shonkwiler is the Senior Agricultural Economist at Advance Trading, Inc. The risk of trading futures and options can be substantial. All information, publications, and material used and distributed by Advance Trading Inc. shall be construed as a solicitation. ATI does not maintain an independent research department as defined in CFTC Regulation 1.71. Information obtained from third-party sources is believed to be reliable, but its accuracy is not guaranteed by Advance Trading Inc. Past performance is not necessarily indicative of future results.
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