What Traders are Talking About:
* 2012 in review. This past year will go down as one for the record books in agriculture. The drought of 2012 was "the" story this year with heat and a lack of rain baking the country's midsection. The drought led to record corn and soybean prices this summer with front-month corn futures topping out at $8.43 3/4 in August and front-month soybean futures peaking at $17.89 in September. Prices have backed off sharply from those levels, but corn and soybean futures remain historically strong due to tight supplies. While wheat futures pulled strength from corn and soybeans, the market didn't get close to its record highs. In fact, Chicago wheat futures topped at $9.47 1/4 in July, $3.87 1/4 below the all-time high of $13.34 1/2 posted in 2008. In addition to the dynamic fundamental situation, grain traders also had to keep a constant watch on macro-economics throughout 2012. From the financial mess in Greece that spread through the euro-zone, to the U.S. elections and now the fiscal cliff situation, the macro-economic environment was a drag on markets and the global economy.
The long and short of it: With all the ups and down, highs and lows, 2012 will go down in the history books as a "great" year. There definitely wasn't a lack of drama and news to move markets this year.
* 2013 -- a look ahead. As 2012 raps up and the new year begins, many of the same issues that violently moved markets last year are still in play. Macro-economic issues are front and center, primarily the U.S. fiscal cliff talks. Odds of going over the cliff are increasing with each passing minute of impasse in Washington. Even if the fiscal cliff is avoided with an 11th-hour agreement, no one is expecting the fiscal problems to be solved. It will very likely be little more than a kicking of the can down the road (no matter how lawmakers spin it) and the situation will have to be dealt with again later. But from a market perspective, any deal to avoid going over the cliff would be somewhat soothing to investors. Speaking of kicking the can down the road, the euro-zone situation has calmed for now. But the region's struggles will almost certainly flare up again at some point in the new year. Fundamentally, South America is poised to grow a record soybean crop for 2012-13, which is weighing on futures. But from a domestic standpoint, supplies are tight, meaning any late-season problems in Argentina or Brazil would be supportive. Plus, soybean demand is strong. For corn, supplies are very tight, but that is already "in" the market and the runup to record prices this summer slowed demand. Global wheat stocks are tightening, which may improve demand for U.S. wheat, but supplies aren't tight. The issue that looms as the potential catalyst for a strong price rally in the new year is the lingering drought, which is a serious concern in the Plains and western Corn Belt. And while the eastern Corn Belt has gotten some topsoil relief, subsoil moisture is lacking. Simply, the moisture tank is on "empty" for the majority of the Plains and Corn Belt, meaning there will again be a weather focus in the new year.
The long and short of it: Macro-economics and weather remain the focal points for grain traders, although the new year will very likely have some unexpected twists and turns.
* Happy New Year. Grain and livestock markets will observe normal trading hours today. All markets and government offices are closed Tuesday, Jan. 1, for New Year's Day. Livestock markets will reopen at 9:05 a.m. CT and grains will reopen at 9:30 a.m. CT on Wednesday, Jan. 2.
The long and short of it: Have a happy and safe New Year's celebration. I look forward to providing you my daily market commentary in 2013.
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