Another Disappointing Argentine Rain Event

February 19, 2013 12:12 AM
 

What Traders are Talking About:


* Another disappointing Argy rain event. Rains forecast for key production areas in Argentina were again disappointing. The rain event was a "disaster" in the top production state of Buenos Aires, a private forecaster in Argentina told Reuters. Rains were also much lighter than hoped through Cordoba, Sante Fe and Entre Rios. According to the forecaster, the impact to crops from the disappointing rains could be "significant." The next chance for meaningful precip isn't forecast until this weekend and given the recent string of disappointing rain events, some forecasters question whether this system will produce much relief.

The long and short of it: Soybean futures are sharply higher coming out of the long holiday weekend amid concerns the persistent dry weather will take an even bigger bite out of the Argentine crop. Private crop forecasts are likely to decline after another disappointing rain event.

* Demand concerns linger. While the soybean market is being supported by Argentine crop concerns, corn and wheat futures are struggling to find buying interest to start the week amid demand concerns. The wheat export pace has picked up, but it still nothing for traders to get excited about. Corn export demand is poor and unlikely to improve as supplies are simply too tight and high prices forced global end-users to seek alternative feedstocks. Soybeans also have some question marks on the demand side as seasonally, Chinese purchases of U.S. soybeans are slowing. The demand concerns don't stop with grains as meat demand is also a question mark. The boxed beef and pork product markets are both struggling to find short-term lows, signaling prices haven't dropped far enough to spark fresh buying.

The long and short of it: With demand a question market for so many of the ag commodities, buying interest is likely to remain limited until end-user buying signals prices are "cheap enough."

* Watch India on wheat exports. Currently, only state-run firms have been allowed to export up to 4.5 MMT of government wheat reserves. But four Indian ministers are proposing to let private firms export up to 5 MMT of wheat from government reserves as the state stockpiler looks to clean out older supplies ahead of the new-crop harvest. Indian officials say they intend to buy a record 44 MMT of wheat from producers this year. India has roughly three times the amount of wheat in reserves as is "required" for its food security program.

The long and short of it: Increased Indian wheat sales pose a threat to U.S. wheat export demand. State-run Indian firms have been more aggressive with wheat sales since the start of 2013.

 

Follow me on Twitter: @BGrete


Need a speaker for a seminar or special event? Contact me: bgrete@profarmer.com

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