Joseph Vaclavik is the president at Standard Grain in Chicago. Standard Grain provides futures and options brokerage to farms, feedlots, elevators, processors, end-users and traders. Visit www.standardgrain.com for more information.
No Change in South American Weather
Jan 04, 2012
· Grains trade mixed overnight after yesterday’s rally; Grains continue to focus on South American weather issues
· Hot, dry weather continue to impacting pollinating corn in S. Brazil and Argentina; Showers early to middle of next week will likely not be enough to solve problem; Corn in Northern Brazil is looking significantly better
· Outside markets mostly negative this morning with US$ higher, crude/equities slightly lower; Currency action should continue to be a key input for grain prices
· Monsanto exec looks for 15% drop in cotton acreage due to relatively high corn/soy prices
· Option volatility in corn/wheat soaring again yesterday; Feb corn vol near 39%, up from the low 20s just a few weeks ago; Feb 660 straddle in corn settled at 53 cents yesterday
· Cropcast lowering estimate for Argentina corn production to 24.5mmt, down 3mmt from last week; Soybean estimate lowered to 49.8mmt, down 1.6mmt from previous
· Farmer selling across the corn belt was heavy yesterday according to sources
· Chart watchers remain bullish the grain markets, however charts for corn/soy and wheat are now approaching ‘extreme overbought’ conditions
· Canada’s Ag Dept drought maps show that W. Canada’s farm belt is driest in 5 years; Many areas receiving less than 40% of normal rainfall in last 3 months
Grains look poised to continue their recent rally as S. American weather issues worry traders. The markets have the potential to turn on a dime IF weather forecasts were to change; It is the possibility of these sudden changes that make weather markets so difficult to navigate. March corn now 80+ cents removed from recent lows. Technicians are now looking for a move to the $6.80 area after yesterday’s positive close. Overall, we remain neutral to bearish for the next 3-4 weeks.
Producers: We’ll look to price a small percentage of new crop corn on a move over $6/Dec12. If $6 is the worst sale you make this year, you’re in good shape.
As always, call the office with questions or concerns.