What Traders are Talking About:
* Rains expected across Argentina. Argentina is expected to see rainfall throughout the week, although forecast models differ on coverage levels and amounts, so it will be a wait-and-see situation. Temps are expected to cool tomorrow and Wednesday, but turn hotter again by late in the week. In southern Brazil, conditions are expected to be hot and dry throughout the week. There are continued rain chances for Mato Grosso, however, which will continue to slow harvest efforts there.
The long and short of it: The rains in Argentina are the main attention-getter this week. If they are lighter than expected, however, it could trigger a fresh wave of buying.
* Euro-zone optimism fades. Greece failed to reach a deal with private debt holders over the weekend -- and it appears no deal will be struck before EU leaders meet in Brussels today. EU leaders are hoping to focus on jobs and growth, but a permanent rescue fund, a "fiscal treaty" and Greece are likely to dominate the headlines. Until there is a deal between Greece and its private bond holders, EU leaders cannot move forward with a second round of bailout funds which was agreed to in October. Instead, leaders will sign a treaty creating the European Stability Mechanism (ESM), a 500-billion-euro permanent bailout fund that is due to become operational in July. And they are expected to agree the terms of a balanced budget amendment.
The long and short of it: The euro is under pressure, which is pushing the U.S. dollar index higher amid a cautious tone ahead of the EU summit.
* U.S. Cattle herd smallest in 60 years. USDA's semiannual Cattle Inventory Report indicated there are 90.8 million head of cattle and calves in the U.S. as of Jan. 1, which is the smallest tally since 88.1 million head at the beginning of 1952. USDA reported the 2011 calf crop totaled 35.3 million head, which was the smallest since 34.9 million head in 1950. Surprisingly, USDA's data showed herd rebuilding has begun. But there is a distinct drought impact with Texas and Oklahoma beef replacement heifer numbers well below year-ago. Kansas, Colorado, Nebraska, Wyoming and Montana all saw more heifers retained for breeding. In the Midwest, Iowa and Missouri are also expanding the beef herd. Another pocket of expansion is in the Southeast, with Georgia, Florida and Alabama retention numbers up.
The long and short of it: The report data is bullish for 2012 live cattle contracts as there will be an even smaller supply of cattle coming to market than traders anticipated.
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