Wheat Conditions Record-Low For Fall

November 27, 2012 12:14 AM

What Traders are Talking About:

* Record-low fall winter wheat crop rating. USDA's final winter wheat crop ratings of the the fall showed 33% of the crop rated "good" to "excellent" and 26% rated "poor" to "very poor," down 1 percentage point and up 2 percentage points, respectively, from the previous week. The portion of crop rated in the top two categories is a record low for the fall, coming in 10 points below the previous low of 43% in 1999-2000. When USDA's crop ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 = crop failure, 500 = perfect crop), the HRW crop dropped another 6 points to 282, which is the lowest reading ever in the fall, and the SRW crop declined 5 points to 374. The HRW CCI rating is 54 points below year-ago, while the SRW rating is 8 points higher than last year's final fall reading.

The long and short of it: Many producers are sounding the alarm on winter wheat concerns in the Plains. But price action suggests traders have minimal concerns at this time, although that could change if the winter forecast calling for below-normal precip through the Plains materializes.

* Deal reached to keep Greece afloat. Euro-zone finance ministers and the International Monetary Fund reached an agreement overnight that will release a new round of emergency funding that will keep Greece from defaulting on sovereign debt obligations. The deal will cut Greece's debt to 124% of GDP by 2020 and below 110% by 2022. To reduce Greece's debt load, the parties agreed to cut the interest rate on official loans, extend their maturity by 15 years to 30 years, and grant the country a 10-year interest repayment deferral. Greece will receive up to 43.7 billion euros in stages as it fulfills agreed-to conditions. The December installment will consist of 23.8 billion euros for banks and 10.6 billion euros in budget assistance.

The long and short of it: The Greek deal was mildly supportive for global stock markets and commodities overnight. But most investors fully expected euro-zone leaders to reach a deal to keep Greece from defaulting, which is limiting its market impact.

* OECD sees recovery for China. China's economy is expected to grow over the next two years after reduced economic growth this year, according to the Organization for Economic Cooperation and Development (OECD). OECD forecasts China's GDP will expand to 8.5% in 2013 and 8.9% in 2014 after falling to 7.5% this year. The group sees Asia as a whole as a bright spot in the global economy, while Europe will continue to struggle and the U.S. is expected to see tepid economic growth.

The long and short of it: The outlook for China (and Asia as a whole) is positive for commodities, although macro-economic concerns are likely to linger due to struggles in Europe.


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