Is Weather Back In Control???
Jan 17, 2013
Weather uncertainties seem to be pumping a more "risk premium" into the market place then we have seen the past few months. One of the biggest concerns is that the high pressure ridge and heat in Argentina might hit their corn crop at just the WRONG time. Insiders are reporting that a large chunk of the Argentine crop is starting to tassel and up to 50% could be pollinating within the next few weeks. You have to believe "IF" the extreme heat sticks around through the critical growing stage, it could end up being a lethal combination. However, from what I am hearing from the weather gurus, the heat is supposed to break and rain should follow, but how many times have we heard that forecast the past couple of years? I hate to say this, but if the heat breaks and rain comes in South America I suspect some of the recent weather premium will be immediately taken back out of the market.
USDA export sales data this morning showed MASSIVE soybean sales, better than expected wheat sales and corn sale towards the upper end of estimates. WOW!!!
- Corn sales reported at 393,300. The trade was looking for a number between 250,000 and 450,000. Last week 24,200 were reported.
- Soybeans sales reported at 1.79 million. The trade was looking for a number between 550,000 and 750,000. Last week 406,800 were reported.
- Wheat sales reported at 574,700. The trade was looking for a number between 250,000 and 450,000. Last week 233,700 were reported.
It's all about "weather" and "demand" right now. Any unforeseen or bullish combination of the two will push us higher, any bearish combination will cause the trade to quickly deflate premiums. Keep your eye on Asian demand and South American weather. I suspect with some outside market tailwinds, the better than expected export demand numbers released this morning, all we are going to need is the rain in Argentina pushed back further in the forecast and we will have our recipe for another bullish close. Producers should remain patient, while specs should stick with current bull-spreads.
Soybean traders continue to monitor "Chinese demand." Many insiders are reporting surging Chinese meal consumption as farmers try and more rapidly fatten hogs before their New Year festival in February. Bulls are also reminding the trade that Chinese crush margins are almost the best they have been in over a year. The word on the street is that crushers can now lock in profits in excess of $30 on every ton of soybeans they process during the next 30-60 days. The Chinese "cancelations" spooked the trade a couple of weeks ago, but now all of a sudden the trade is more fearful that the Chinese are going to make a late push to secure more US soybeans on rising livestock demand, tight domestic and international supplies, and logistical concerns associated with sourcing all of their soybeans from South America. Keep in mind China just imported 5.89 million tons of soybeans in December, the most in almost three years. As exporters have indicated, they normally see China grabbing between 10 to 20 cargoes of beans each week, but as of late that number has been pushing up closer to 30 cargoes a week. Certainly something worth noting and certainly something that needs to be monitored closely as we move forward.
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