Concerns Building in Argentina

November 18, 2008 06:00 PM

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

Dryness in Argentina, other troubles abound... Forecasters says a ridge of high pressure is building into South America, shutting off any chances for rainfall this week in Argentina. Temperatures have been regularly topping 86 degrees F, which is 5-7 degrees above normal. The second biggest corn province, Buenos Aires, has come under increasing drought stress this month. The soybean market is paying more attention to this situation, but upside potential is limited by these concerns due to ongoing global economic worries.

On top of weather concerns, our farmer friend in Argentina, Eduardo, says credit concerns have escalated. He writes, "Farmers have no money and the ones with money are not going to sow this year. A lot of land looks to be idle for the time being, and with little interest from investors given the high cost in this investment with a relatively low return, means there will be less soybean sown even though it is the cheapest product to sow because there is no money around."

He adds, "Bank interest have gone  from 8% a year to 34%, so that leaves that out. The other financing was given by seed or herbicide company coops. Private elevators do not allow the exporters to declare the sales till 45 days prior to loading, so  there in no forward market and these companies cannot sell the barter of there goods for next years harvest."

"All in all this is a big mess and people, including farmers, are very worn down and with little hope," says Eduardo.

Keep your comments coming. Always good to have conversation with you and input on what you'd like to talk about. E-mail your comments/question to me by clicking here. Please include your location.

Opening calls. These calls originate more than three hours before the open -- use caution, things change:

Corn: 1 cent higher. Futures were mostly around a penny higher overnight amid short-covering. Futures settled mostly 6 to 7 cents lower yesterday, which was on or near session lows. Futures extended losses into the close to wipe out all of Monday's gains. The back-and-forth price action continues amid economic uncertainty and a lack of strong fundamental news. December corn futures are in the lower half of the extended consolidation range.

Soybeans: 5 to 6 cents higher. Futures were 5 to 6 cents higher overnight amid short-covering. Futures closed 4 to 5 cents lower yesterday on late-session crude oil weakness. March soybeans posted an inside day of trade on the charts, pivoting around the $9.00 level through the day. Near-term support lies at last week's low of $8.84 and resistance lies around $9.30. Trending through either of these levels would likely direct prices to either support at $8.50 or resistance near $10.00.

Wheat: Mixed. Futures were 2 cents lower to fractionally higher overnight. Futures drifted lower in late trade, with Chicago closing 4 to 6 cents lower yesterday. March Chicago wheat held above support at Monday's low, but the low-range close signals the potential for spillover selling this morning. Support lies at last week's low of $5.28.

Cash cattle expectations: Watching beef. Boxed beef prices firmed 10 to 79 cents Tuesday to continue recent price strength. But movement was only 200 loads on the day. More importantly, the sharp drop in cattle prices means it's becoming less likely packers would be willing to pay even steady $93 for cash cattle. Most traders and cash sources are expecting cash prices to decline $1 to $2 in the Plains.

Futures call: Mixed. Futures should see some short-covering following yesterday's plunge, but bears certainly hold momentum going into this morning's session. February live cattle posted a new contract low and a new contract-low close yesterday. That opens the door for the next leg down, technically.

Cash hog expectations: Mostly steady. Cash hog bids are expected to be mostly steady with a few scattered firmer bids likely across the Midwest today. Most packers are still in need of late-week slaughter supplies as a large Saturday kill is planned given the holiday slaughter schedule next week. Plus, the average pork cutout value was up 99 cents Tuesday to keep margins in the black.

Futures call: Mixed. Futures are called to open mixed amid spreading. Ideas recent losses have been overdone resulted in periods of short-covering support yesterday and helped to limit losses. Bull spreading was seen yesterday, although upside potential was limited for nearby contracts as December hogs hold around a $3 premium to the cash index.

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