Poll: Analysts See Big Drop In Grain/Soy Prices

January 28, 2013 12:18 AM

What Traders are Talking About:

* Grain/soy prices seen falling sharply this year. A Reuters poll shows industry analysts expect corn, soybean and wheat prices to fall between 13% and 22% during the 2013 calendar year. The poll pegged the spot corn futures price on Dec. 31 at $5.47 per bu., down nearly 22% from end 2012 and about 25% below the current level amid expectations for increased plantings and improved weather. U.S. soybean prices are likely to fall 17% by the end of this year, based on the average guess of analysts, as expected big harvests in South America and the U.S. help replenish global inventories. Wheat futures are seen falling nearly 13% in 2013 as strong overseas harvests should make up for lagging production in the U.S. Plains, according to the Reuters poll.

The long and short of it: Weather will be the biggest factor in deciding price action during this year, as the sharp drop in prices reflected by analysts is largely based on more "normal" weather patterns compared to year-ago.

* South American weather watch. Conditions are forecast to be hot and dry across Argentina's key grain areas the first half of this week after cooler temps and scattered rains last week. Temps are expected to cool and there's a chance for rains late in the week, although some forecasters are skeptical the system will provide much relief. In Brazil, rains continue to hamper harvest efforts in northern production regions of central Brazil, with forecasts signaling the wetter pattern will continue this week. In southern Brazil, conditions are expected to be mostly hot and dry, although there are some scattered rains in the forecast for late in the week.

The long and short of it: Traders are closely monitoring the rain event forecast for central Argentina later this week. How that system develops will largely shape price action in the soybean market this week.

* COF bullish. The combination of fewer-than-expected placements and greater-than-anticipated marketings last month left the number of cattle on feed as of Jan. 1 below expectations. The number of cattle in feedlots continues to decline compared to year-ago... and importantly, is now lower than the previous month for the first time since September. The year-over-year and month-over-month decline in feedlot supplies should continue for months to come as U.S. cattle numbers tighten. Cattle traders should get another set of bullish data Friday as USDA's Cattle Inventory Report will confirm the U.S. cattle herd continues to shrink

The long and short of it: Given the recent sharp price break, cattle futures should be higher to sharply higher today in reaction to this data.


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