Evening Report (VIP) -- December 3, 2012

December 3, 2012 09:09 AM

ECONOMIC REPORTS IN FOCUS THIS WEEK... Watch for outside markets to have a major impact on the grain and soy markets this week as this is a quiet week on the ag report front and a busy one in terms of economic reports. Notably, Friday will bring the key Employment Report from the Labor Department. Consumer Sentiment data also comes out that day, but the jobs data is the key set of numbers. Leading up to that, the private-sector ADP jobs report is due Wednesday. This will get more attention as recent weekly jobless figures (out Thursday morning) have become more erratic due to the impacts of Hurricane Sandy. Also on Wednesday, Productivity and Costs data arrives along with Factory Orders and the ISM non-manufacturing index.

Otherwise, markets will continue to watch each development on the fiscal cliff front, with comments from the key players involved likely to keep moving markets. The situation in Greece remains another watchpoint along with tensions in the Middle East relative to the crude oil market in particular. For more details about what's on tap this week, click here.


MOISTURE STRESS INCREASES ACROSS BRAZIL... Meteorologist Gail Martell of MartellCropProjections.com says dry pockets have developed in Mato Grosso, Brazil's largest soybean state, after reduced rainfall over the past two weeks. Meanwhile, soybean areas in southern Brazil have become very dry. "Parana has been on the watchlist for several weeks due to persistent dryness. Strong thunderstorms and heavy rainfall developed last week providing welcome relief to developing crops," says Martell. "The subsoil drought remains worrisome, however, exceeding 6 to 8 inches in southern areas. Temperatures in Brazil's farm belt have been persistently hot for over two weeks, making moisture stress worse."

Meanwhile, too much of a good thing continues to be seen across Argentina, with more rain in the forecast to further stall planting this week. "The forecast continues very wet in the northern two-thirds of the grain belt. Santa Fe, Cordoba and northern Buenos Aires would receive 3 to 6 inches of rain this week, if the forecast verifies. A trough of low pressure is expected to stall over the central grain belt," says Martell.

SHOWERS POSSIBLE IN U.S. HRW WHEAT BELT NEXT WEEK... The last significant rain event across the Central and Southern Plains was in mid-October, reminds Martell, who adds that above-normal temps have only heightened the need for rains. But she says there is some hope for rain in the forecast with a strengthening southern jet stream. "If the sub-tropical jet stream develops, as suggested, it would produce better odds for precipitation in Colorado, Nebraska and northern Kansas," she says, although she warns that western Texas, southwest Kansas and Oklahoma may miss out on the much-needed precip.


GLOBAL COTTON PRODUCTION TO DECLINE IN 2013-14... The International Cotton Advisory Committee says it expects global cotton production to decline by 11% to 23.2 MMT in 2013-14, as lower cotton prices are giving producers more encouragement to plant competing crops. Sharp production declines are expected in the U.S. and Turkey, where grains and soybeans are expected to gain more acres compared to cotton. Smaller crops are also projected in China, Pakistan, central Asia and Francophone Africa. Production is forecast to be only slightly lower in India, assuming a recovery in the average yield.

After three consecutive years of increase, global stocks could contract by 6% from the record level of 16.6 MMT forecast in July 2013, to 15.6 MMT in July 2014, says ICAC. "Most of this reduction in stocks is expected to take place outside of China," it says. Click here for more.


CME GROUP'S ACQUISITION OF KCBT COMPLETE... The CME Group today announced its acquisition of the Kansas City Board of Trade (KCBT) is complete. Today, traders were able to trade both KCBT's flagship Hard Red Winter (HRW) wheat futures and the CBOT Soft Red Winter (SRW) wheat contract on CME Group's Globex electronic trading platform and through open outcry.

Beginning Dec. 10, customers will be able to take advantage of the implied spread between SRW and HRW wheat futures products. CME Group will begin integrating KCBT business operations and clearing services in order to achieve efficiencies for members, customers and shareholders. The timetable for integration includes:

  • Ongoing operation of the KCBT trading floor for at least six months;
  • Integration of clearing systems (specific timeline to be announced Q1 2013); and
  • Maintenance of a committee made up of KCBT market participants to advise on HRW wheat contract terms and conditions for at least three years.
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