Fundamental Focus Remains on Weather

January 18, 2012 12:22 AM

What Traders are Talking About:

* South American forecast -- little change from yesterday. The South American forecast is about the same this morning as it was yesterday -- scattered rain chances throughout the 7-day window, with the best chance for rains late this weekend in Argentina and early next week in southern Brazil. Temps are expected to be seasonably hot over the next several days, but generally cooler than normal for the second half of the 7-day window.

The long and short of it: With multiple rain chances in the forecast, corn and soybean futures are at risk of profit-taking after Tuesday's gains. And if corn violates support at last week's lows, it could trigger a fresh wave of selling.

* AWB: La Nina shows signs of weakening. The latest update from the Australian Bureau of Meteorology indicates La Nina is showing signs of weakening and should end by spring. A winter peak of La Nina followed by a gradual weakening is consistent with other forecasts. Now, it appears just a matter of how quickly La Nina fades. The quicker La Nina dissipates, the better the chances for improved South American weather to finish the growing season. While South American weather is of primary concern right now, the fading of La Nina would have an impact on weather conditions in Plains this spring as the winter wheat crop breaks dormancy and on Corn Belt conditions this summer.

The long and short of it: Weather will be a key fundamental driver of price action in grain and soy futures. And La Nina will play a key role in the weather outlook.

* Euro-zone update: Some good news, but concerns linger. The euro was supported overnight by reports the International Monetary Fund is seeking $1 trillion to insulate the global economy from the euro-zone debt crisis. With the euro higher, the U.S. dollar is under pressure. But Greece remains a primary concern as the country works to avoid defaulting on debt. The Greek government meets today with creditors over the interest rate Greece will offer on new bonds.

The long and short of it: Recent strength in the euro is expected to be short-lived as debt problems throughout the euro-zone linger.


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