Soybean Market Reacting To Developing Heat and Dryness In Argentina

December 23, 2013 12:01 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn and wheat futures are narrowly mixed, while soybeans are trading mostly 3 to 5 cents higher. Light trade is expected throughout this week as some traders are taking an extended Christmas break. Cattle futures are expected to open firmer on support from the Cattle on Feed Report and hogs are seen opening mixed.


* Weather concerns heightening in Argentina. The Argentine soybean crop is off to a favorable start, with the country's ag ministry labeling most of the crop as "good" to "very good" in its weekly update released last Friday. But the ag ministry also warned that crops will be impacted if hot, dry conditions that developed last week linger. The forecast calls for rains Wednesday over a portion of the country's main grain production area, but otherwise, the outlook is generally hot and dry. The hot, dry weather would also impact corn, though traders' focus is on the soybean crop. Late last week an Argentine Pro Farmer Member told me, "The corn crop is okay, but suffering a bit from very high temps and wind. But there is a good quantity of moisture in the ground. Soybeans are also okay. These very high temps will affect the crop, but it is too early to determine any damage." Meanwhile, Pro Farmer South American consultant Dr. Michael Cordonnier said on Friday his biggest crop concern in South America is the Argentine corn crop. The earliest corn is pollinating in hot and dry conditions
and 35% or one million hectares (2.47 million acres) are yet to be planted.

The long and short of it: The hot, dry forecast is supporting soybean futures. How the rains forecast for Christmas day pan out will be key to price direction later this week.

* China finds bird flu in chicken flock. Chinese officials confirmed a case of H5N2 bird flu on a chicken farm in the northern province of Hebei. The disease reportedly killed 4,000 chickens and a total of 125,700 birds have been culled in the area. Chinese officials have previously confirmed multiple cases of the H7N9 strain and one case of a new H10N8 strain in humans. Health authorities are encouraging tighter supervision for the disease throughout the country.

The long and short of it: If more cases of bird flu are confirmed in poultry flocks, it will raise concerns about a serious outbreak and reduced Chinese feed demand.

* COF Report friendly for deferred cattle futures. USDA says cattle feedlot inventories totaled 10.725 million head on Dec. 1, roughly 100,000 head fewer than traders were anticipating. This is second lowest Dec. 1 feedlot number since USDA's current data series began in 1996. The mildly smaller-than-expected On Feed number was due to the combination of Placements coming in nearly four percentage points under expectations and Marketings slightly outpacing the pre-report guess.

The long and short of it: The On Feed and Marketing categories were very close to the pre-report guesses, meaning there will be little impact on nearby live cattle futures from this data. But deferred cattle futures should find some support from the lower-than-expected Placements figure.


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