What Traders are Talking About:
* Weather price-supportive. The weekend rain event in Argentina was disappointing as most areas missed out on needed precip. Scattered rains were seen through southern Brazil, which will provide some relief there, but not enough to eliminate dryness concerns. Mato Grosso, Brazil received more harvest-delaying rains over the weekend. This week's forecast calls for mostly hot and dry conditions across Argentina's grain belt. There is a chance for rains late in the week, but coverage levels and amounts are expected to be light. In Brazil, scattered rains will continue across southern Brazil early this week, while wet conditions will continue to hamper harvest efforts in Mato Grosso.
The long and short of it: South American weather is supportive for soybeans (and to a lesser extent corn) to start the week and that is traders' primary fundamental focus at this time.
* Focus also on Chinese demand. Chinese demand for old-crop U.S. soybeans has eased some, but the country has been actively buying 2013-crop U.S. soybeans the past two weeks. With just six days until China virtually shuts down for two weeks during the Lunar New Year celebration, traders are anticipating more Chinese business to surface this week.
The long and short of it: Any additional Chinese purchases of U.S. soybeans would be bullish, especially if South American weather remains price-supportive.
* Bullish Cattle Inventory Report. The U.S. cattle herd as of Jan. 1 at 89.3 million head was the smallest since 88.1 million head in 1952. The 2012 calf crop at 34.3 million head was the smallest since 33.7 million head were born in 1949. The surprise in this report, however, came from beef replacement heifers, which came in 2% above year-ago, signaling cattle producers have started rebuilding their beef herds. Much of the heifer retention is in areas outside of the Plains, with the exception of Texas, which had a heifer retention rate 9.1% greater than year-ago despite severe drought conditions. With more heifers being held back for breeding purposes, it points to less market supplies, which keeps the cattle market on pace for a 10-year cycle high later this year.
The long and short of it: With the cattle inventory and calf crops coming in lower than anticipated and the start of herd rebuilding, the report data is bullish for cattle futures. This should help cattle futures build on this week's rebound off the recent lows.
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